💎 BUYING AND SELLING 💎

 BUYING – It is the acquisition of an object in exchange of money.

 SELLING – It is the process of acquiring money in exchange of relinquishing all claims of
ownership from an object.

COMPARISON BETWEEN BUYING AND SELLING

 What is the difference between buying and selling?

BUYING SELLING
Buying is to obtain something in Selling is giving up something in
Definition
exchange for money or goods. exchange for money or goods.
Type Verb Verb
 Jack usually buys his groceries  June sold her new car. It was
on Saturdays. barely used.
 The Smiths are buying a new  Mary told me, she is planning on
house. selling her house.
Example:  We need to buy a new car.  I am having a yard sale. I am sell-
 The store was having a sale, ing all the junk I have lying around
we bought many items. the house.
 I need to buy the books for this  John is going to sell his books from
semester. last semester

CONSUMER BUYING BEHAVIOR

 How do consumers behave in purchasing goods and services?

1. Impulse Purchases
The consumer makes a purchase with little to no thought or planning involved. In most
instances this happens with low priced items.

2. Routine Purchases
There are items consumers are used to purchasing every day, once a week, or monthly.
These can range from a morning cup of coffee from a nearby convenience store, to milk,
eggs, and cheese from the supermarket.

3. Limited Decision Making

When customers engage in purchases that require limited decision making, they may
seek advice or a suggestion from a friend.

4. Extensive Decision Making

Consumers spend substantial amounts of time researching a high number of potential
options before they buy. They speak with trusted friends, family, colleagues, and sales
professionals, and read reviews and ratings online and in consumer magazines.

SELLING PRODUCT
Selling a product does not have to be complicated. At its most basic level, a sales
program is defined principally by what you sell, who you sell it to, and how you sell it.

 What are the things to remember in selling?

1. Showing Enthusiasm for the Product
a. Study your product.
b. Emphasize the perks of the product to customers.

2. Connecting with the Buyer

a. Share your love of the product.
b. Anticipate your customers’ motivations.
c. Practice breaking the ice with customers.
d. Convert the customer’s motivations into the product’s characteristics.
e. Be honest about your product.
f. Close the sale.
g. Give customers time to consider.

3. Selling Products as an Owner Salesperson

a. Familiarize yourself with all aspects that feed into the end sale of a product.
b. Market your product.
c. Review your sales performance.
d. Troubleshoot sales, if necessary.

 What is pricing?

- It is the process whereby a business sets the price at which it will sell its products and
services, and may be part of the business' marketing plan.
- Pricing refers to the decision-making process that goes into establishing a value for a
product or service.

In business, expenses are divided into two major categories: the cost of goods and
operating expenses. The cost of goods would be the cost of production in the view of the
manufacturers, while to the wholesaler or retailer, it is the price paid to manufacturer for the
merchandise. The operating expense (or overhead expense) includes all the other expenses
required to operate the business such as salaries, rent, utilities, maintenance, advertising, etc.

Definition of Terms:
 Cost – It is the price a merchandising business or retailer pays for a product.
 Selling Price/Retail Price – It is the price for which a merchandising business or retailer
sells a product to a consumer.

 How can we determine the price of a product?

 The Margin
- It is also known as gross margin.
- It is defined as sales minus cost of goods sold.

 The Markup
- It refers to the difference between selling price and cost.
- Markup is the amount by which the cost of a product is increased in order to derive the
selling price.
- It is added to cost to cover the operating expenses and provide profit to the owners.
Markup Rate – It refers to the percent markup (the markup expressed in percent).
a. Markup Based on Cost
b. Markup Based on Selling Price

The following variables will be our mathematical treatment on markup:

TERMS FORMULAS
SP = Selling Price SP = C + M
C = Cost  M = SP – C
M = Markup  C = SP – M

SP = C + (C x MRC) or SP = C x (1 + MRC)
MC = Markup on Cost
MSP = Markup on Selling Price SP
C=
1+ MR
MR = Markup Rate MC = C x MRc or simply, Mc = SP – C
MRC = Markup Rate on Cost
MRSP = Markup Rate on Selling Price MSP = SP x MRSP or simply, MSP = SP – C

MC SP
MRC = or MRC = ( ) – 1
C C

M SP C
MRSP = or MRSP = 1 – ( )
SP SP

ILLUSTRATIONS:

Example 1: A mathematics book cost the store manager ₱161 and he marked it up another
₱89. What was the selling price of the book?

Given: C = ₱161 M = ₱89

Solution: SP = C + M
SP = ₱161 + ₱89
SP = ₱250

Thus, the selling price of the mathematics book is ₱250.

Example 2: ASUS Electronics pays ₱37,200 for a digital camcorder. If the markup is 19% on
the cost, find the selling price.

Given: C = ₱37,200 MRC = 19% = 0.19

Solution:
 SP = C + (C x MRC) SP = C x (1 + MRC)
SP = ₱37,200 + (₱37,200 x 0.19) SP = ₱37,200 x (1 + 0.19)
SP = ₱37,200 + ₱7,068 SP = ₱37,200 x 1.019
SP = ₱44,268 SP = ₱44,268

Thus, the selling price of the digital camcorder is ₱44,268.

Example 3: XYZ Sports Inc. sells home-gymnasium package for ₱175,000 and maintains a
markup of 37% on selling price. Find the markup value.

Given: SP = ₱175,000 MRSP = 37% = 0.37

Solution: MSP = SP x MRSP

MSP = ₱175,000 x 0.37
MSP = ₱64,750

Thus, the markup value is ₱64,750.

Example 4: The grocer purchases a gallon of mineral water for ₱49.50 and sells it for ₱56.75.
What is his gross margin?

Given: SP = ₱56.75 C = ₱49.50

Solution: M = SP – C
M = ₱56.75 – ₱49.50
M = ₱7.25

Thus, the margin is ₱7.25.

Example 5: The washing machine had a selling price of ₱4,792. It had been marked up
₱1,248. What was its cost?

Given: SP = ₱4,792 M = 1,248

Solution: C = SP – M
C = ₱4,972 – ₱1,248
C = ₱3,544

Thus, the cost is ₱3,544.

Example 6: A hot-and-cold water dispenser sells for ₱8,021.50. the markup on it is 31.5% of
cost. Find the cost.

Given: SP = ₱8,021.50 MR = 31.5% = 0.315

SP
Solution: C=
1+ MR

₱ 8,021.50
C=
1+0.315
 ₱ 8,021.50
C=
1.315

C = ₱ 6,100

Thus, the cost is ₱ 6,100.

Example 7: A laser printer costing ₱8,750 is sold for ₱12,250. Find the markup rate based on
cost.

Given: SP = ₱12,250 C = ₱8,750

Solution:

MRc =
MC
C
MRc = ( SPP )−1
SP−C
MRC =
C MRC = ( ₱₱12,250
8,750 )
−1

₱ 12,250−₱ 8,750 MRc = 1.40 – 1

MRc =
₱ 8,750
MRc = 0.40 or 40%
₱ 3,500
MRc =
₱ 8,750

MRc = 0.40 or 40%

Thus, the markup rate on cost is 40%.

Example 8: A wall clock cost ₱608.40 and sell for ₱780. What is the percentage of markup
based on selling price?

Given: SP = ₱780 C = ₱608.40

Solution:

M SP
MRSP = C
SP MRSP = 1 – ( )
SP
SP−C
MRSP = ₱ 608.40
SP MRSP = 1 – ( )
₱ 780
₱ 780−₱ 608.40
MRSP = MRSP = 1 – 0.78
₱ 780
MRSP = 0.22 or 22%
MRSP = 0.22 or 22%
 Thus, the markup rate on selling price is 22%.

 The Markdown
- It is a price reduction from the original selling price of merchandise.
- The reduction on the regular price of a product may have been brought by damaged
goods, discontinued item, old stocks, clearing inventory, and other events.

Most markdowns should not be viewed as losses but as sales promotion opportunities
used to increase sales and profits. When sale is over, raising prices to the original price is called
as markdown cancellation.

MARKDOWN
MARKDOWN
CANCELLATION
Sale Price Regular Price

The following are the formulas for the markdown:

Markdown1 = Regular Price x Markdown Rate

Markdown2 = Regular Price – Sale Price

Sale Price = Regular Price – Markdown
or
Sale Price = Regular Price x (1 – Markdown Rate)
Markdown
Markdown Rate =
Regular Price
Sale Price
Regular Price =
1−Markdown Rate

**Convert the Rate to Decimal**

Example 1: What are the markdown and the sale price on an antique jar that has a regular
price of ₱35,800 and is on sale for 26% off the regular price?

Given: Regular Price = ₱35,800 Markdown Rate = 26% = 0.26

Solutions:

Markdown = Regular Price x Markdown Rate

Markdown = ₱35,800 x 0.26
Markdown = ₱9,308

Sale Price = Regular Price – Markdown Sale Price = Regular Price x (1 – Markdown Rate)
Sale Price = ₱35,800 – ₱9,308 Sale Price = ₱35,800 x (1 – 0.26)
Sale Price = ₱26,492 Sale Price = ₱35,800 x 0.74
Sale Price = ₱26,492

Thus, the markdown is ₱9,308 and the sale price is ₱26,492.

Example 2: An old LED TV model which was marked down at 20% is on sale for ₱70,265.
What is the regular price?

Given: Sale Price = ₱70,265 Markdown Rate = 20% = 0.20

Sale Price
Solution: Regular Price =
1−Markdown Rate

₱ 70,265
Regular Price =
1−0.20

₱ 70,265
Regular Price =
0.80

Regular Price = ₱87,831.25

Thus, the regular price is ₱87,831.25.

Example 3: If all the merchandise, with a selling price of ₱7,800 is to be sold for ₱6,474. How
much is the markdown and what is the markdown rate?

Given: Regular Price = ₱7,800 Sale Price = ₱6,474

Solution:

Markdown = Regular Price – Sale Price

Markdown = ₱7,800 – ₱6,474
Markdown = ₱1,326

Markdown
Markdown Rate =
Regular Price

₱ 1,326
Markdown Rate =
₱ 7,800

Markdown Rate = 0.17 or 17%

Thus, the markdown is ₱1,326 and the markdown rate is 17%.

Take note:
 Setting the right price is important for goods to sell.
 Traders would sometimes reduce the selling price to get rid of slow-moving merchan-
dise or out-of-style inventories to stimulate increased sales or to meet the prices of
competitors.
“The moment you make a mistake in pricing, you’re eating into your reputation or your
profits.”
– Katharine Paine

This tells us that we need to determine what is reasonable price for our customer and it
is very difficult to determine how we will price our product in its reasonable and fair value. The
moment that our price is not reasonable then it will affect the reputation of our business that is
why careful analysis and evaluation as to the price of our product is an important consideration
in business.

 Why is buying and selling important in everyday life?

Buying is important in order to get what we need that is not within our capability to make.
While selling is important in making income. It is also important in promoting our work and in
improving our capability to negotiate. Nothing is free anymore. We either make it, buy it, sell it,
or exchange it. Not all of our needs are within our reach. In order for us to get those essential
needs, we need to buy it. The expenses are increasing but the income doesn't. For us to gain
back the money that we used to buy, we make and sell stuff. It is easier for us to just buy stuff
we need than making it. For example, you need a new pair of gloves. The capability of making
one is within your reach but instead, you chose to buy one. Buying things can also be beneficial.
It provides you more options and it doesn't require a lot of effort. On the other hand, selling is
also important. Let's say you have a talent for making embroidered handkerchiefs and decided
to sell it online. You can gain money by selling. It can recover your lost income and even
increase it. It can improve your negotiating skills and in how you interact

 How do prices of goods or services affect our buying behavior?

The price you set for a product or service has a very significant effect on how the con -
sumer behaves. If consumers believe that the price you're charging is lower than competitors, it
could cause a major spike in sales. But if the price you set is significantly higher than expected,
the response can be disappointing. Before you decide to raise the price of your existing product
or service you should understand how that could affect consumer behavior. For one, when you
raise the price, you risk turning the customer off. If the customer has the choice to get the same
product from a competitor at a lower price you could lose the customer permanently. On the
other hand, raising the price could have no effect at all, especially if it is a product that is in high
demand and not available at competitors. In fact, charging a higher price compared with other
similar products and services sometimes entices consumers to buy because some buyers
equate a high price with a superior-quality product. Lowering or initially setting a lower price
than expected can have a different set of effects on a consumer. In one case, a price-conscious
consumer is grateful for a price break and will possibly stock up on the item at the low price. In
other cases, the consumer could become suspicious of the low price and assume it means the
product is of a lower quality.

 If you are a seller, what will you choose: to price goods high in order to earn higher
profit or to price goods that is affordable to all and earn a profit?

The price you charge for your product or service is one of the most important business
decisions you make. Setting a price that is too high or too low will - at best - limit your business
growth. At worst, it could cause serious problems for your sales and cash flow.
 If you're starting a business, carefully consider your pricing strategy before you start.
Established businesses can improve their profitability through regular pricing reviews.

When setting your prices, you must make sure that the price and sales levels you set will allow
your business to be profitable. You must also take note of where your product or service stands
when compared with your competition.

GENERALIZATION

Buying is the acquisition of an object in exchange of money, whereas selling is acquiring

money, in exchange of relinquishing all claims of ownership from an object. Buying and selling
are two terms that are often used relatively; whenever there is talk to buying, there is talk of
selling. In buying and selling, we need to consider the concept of pricing and it is defined as the
process of fixing the value that a manufacturer will receive in the exchange of services and
goods. Pricing method is exercised to adjust the cost of the producer’s offerings suitable to both
the manufacturer and the customer. The pricing depends on the company’s average prices and
the buyer’s perceived value of an item, as compared to the perceived value of competitor’s
product. Also, it is important to consider what is mark-up and markdown. Mark-up is the
difference between the selling price of a good or service and cost whereas markdown is a
devaluation of a product based upon its inability to be sold at the original planned selling
price. Remember, setting the right price is important for goods to sell. Traders would sometimes
reduce the selling price to get rid of slow-moving merchandise or out-of-style inventories to
stimulate increased sales or to meet the prices of competitors.