Chapter 8 Key Terms

Question	Answer
Selling Price	Cost plus markup equals selling price.
Cost	Price retailers pay to manufacture or supplier to bring merchandise into store.
Markup	Amount retailers add to cost of goods to cover operating expenses and make a profit.
Margin	Difference between cost of bringing goods into store and selling price of goods.
Gross Profit	Difference between cost of bringing goods into the store and selling price of the goods.
Operating Expenses	Regular expenses of doing business. These are not costs.
Overhead Expenses	Operating expenses not directly associated with a specific department or product.
Net Profit	Gross profit - Operating expenses.
Net Income	Gross profit less operating expenses.
Dollar Markup	Selling price less cost. Difference is the amount of the markup. Markup is also expressed in percent.
Percent Markup on Cost	Dollar markup divided by the cost; thus, markup is a percent of the cost.
Markdowns	Reductions from original selling price caused by seasonal changes, special promotions, and so on.
Dollar Markdown	Original selling price less the reduction to price. Markdown may be stated as a percent of the original selling price.
Perishable	Goods or services with a limited life.
Fixed Costs (FC)	Costs that do not change with increase or decrease in sales.
Variable Costs (VC)	Costs that do change in response to change in volume of sales.
Selling Price	Cost plus markup equals selling price.
Contribution Margin (CM)	Difference between selling price and variable cost.
Breakeven Point (BE)	Point at which seller has covered all expenses and costs and has made no profit or suffered a loss.

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	Created by Veronica Huninghake about 2 years ago