| A major step toward making a profit in retailing is selling merchandise for more than it has cost you. The difference between the cost of the merchandise and the retail price is called the mark-up. These are the dollars that are now available to pay the operating expenses of the business. When establishing the markup on a product, two points should be noted:
1. The cost of the merchandise used in calculating markup consists of the base invoice price for the merchandise plus any transportation charges minus any quantity and cash discounts given by the seller
2. Retail price, rather than cost, is ordinarily used in calculating percentage markup. The reason for this is that when other operating figures such as wages, advertising, and profits, are expressed as a percentage, all are based on retail price rather than on the cost of the merchandise being sold. | 
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