The terms "markup" and "markup percent" are technical terms that are used in business. Be sure you understand the definition of each. Both terms are commonly misused and misunderstood.

Markup: Technically this term only applies to retail (or reselling) businesses. If a retail business buys an item for $10 and sells it for $15, then the markup is $5. The term markup is not applied to businesses that manufacture (or significantly alter) items. For instance, it is not fair to say that a pharmaceutical company that pays $0.10 for the ingredients in a pill and sells the pill for $1.10 has a markup of $1.

Markup Percent: When using the term markup percent, be sure that the numerator is the markup and the denominator is the wholesale price. On page 64, you will see that this differs from the term "discount percent." When calculating discount percent, the denominator is the retail price.

Have you ever wondered what products you purchase have significant markups? Visit The Consumerist to see a list of the five retail mark-ups to watch out for.

To find the markup percent for each item, divide the markup by the wholesale price.

3. Automobile:

   

   The markup percent is about 10%. This is a typical markup rate for a new car. For used cars, the markup rate is often higher.

4. Leather Chair:

   

   The markup percent is about 240%. This is a typical markup rate for new furniture. Having a very high markup rate is what allows furniture stores to have high discount sales.