Markdown Calculator

Markdown Formula

The formula to calculate the new price after applying a markdown is given by:

\[ NP = OP - \left(\frac{OP \times MD}{100}\right) \]

where:

• \(NP\) represents the new price,
• \(OP\) denotes the original price,
• \(MD\) is the markdown percentage.

Example Calculation

Assuming an original price of $100 and a markdown of 5%, the new price is calculated as follows:

\[ NP = 100 - \left(\frac{100 \times 5}{100}\right) = 100 - 5 = \$95.00 \]

This results in a total decrease of $5.00, reducing the price to $95.00.

Importance in Finance

Markdowns are vital in retail and finance for stimulating sales of slower-moving inventory, thereby making goods more competitive and accessible in the market. While it might seem counterintuitive, this approach can lead to greater overall profitability through increased sales volume.

Common FAQs

1. What distinguishes markdown from markup?

   • Markdown involves reducing the price of goods to increase sales, while markup is the process of increasing the base price to ensure profit.

2. How does markdown impact overall revenue?

   • Although markdowns reduce individual item prices, they can lead to higher overall revenue through increased sales volume.

For more insights and calculations on financial strategies, exploring other calculators like the price elasticity of demand can provide a deeper understanding of how price changes affect sales and profit.