If you work in sales, you will probably appreciate our markdown calculator. It will help you to determine the list price that, after a given markdown, will result in an expected markup or profit margin. If you are not sure what do these terms mean, just keep reading to discover their definitions and a step-by-step tutorial of how to calculate the markdown price.
Markdown is the lowering of the product price, basing on the inability to sell it at the initial price. For example, a shirt in a clothing shop can initially cost $50. If almost no one wants to buy it at this price, it is common that a markdown (for example of 20%) is introduced. After the markdown, the shirt costs only $40 and while the shop owner will have a lower profit on each sold shirt, he might actually sell more shirts that before.
Markdown is a bit different from a discount, which is usually offered to a specific group of people such as students or frequent buyers. While markdowns are offered to everyone, discounts make customers feel they are treated in a special way.
Our markdown calculator finds all data necessary in the sales process for you. All you have to do is to input any three of the values listed below to have a full overview of the process.
Let's assume you produce clothes. The cost of producing one shirt is, as assumed earlier, $10. You want to give your customers a 30% markdown, at the same time keeping a 50% markup on the item.
100% * $10 = $10.
$20 + $10 = $20.
$10 / $20 = 50%.
$20 / (100% - 30%) = $20 / 0.7 = $28.57.
$28.57 - $20 = $8.57.
You have just calculated that you have to give the list price of the item as $28.57. After some time, you can give your customers a markdown of 30% and still have a 100% markup on the product.
For more complicated sales cases, you can always check our markup and margin calculator for 2 sets.