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Legal Definitions - markon
Definition of markon
Markon refers to the initial amount or percentage added to the direct cost of producing or acquiring a product to determine its original selling price to customers. This initial addition is designed to cover a business's overhead expenses, such as rent and salaries, as well as to generate a profit margin, before the item is first offered for sale. It is distinct from subsequent price adjustments; later increases are called markups, and later decreases are called markdowns.
Example 1: Retail Clothing Boutique
A high-end clothing boutique purchases a shipment of designer dresses from a wholesaler, with each dress costing the boutique $200. To cover its operational costs (like store rent, staff salaries, and marketing) and achieve a desired profit, the boutique decides to initially price each dress at $550 for sale to its customers. The difference of $350 ($550 - $200) represents the markon. This is the initial amount added to the wholesale cost to establish the first retail price.
Example 2: Electronics Manufacturer
An electronics company develops a new line of wireless headphones. After calculating all manufacturing expenses, including materials, labor, and factory overhead, they determine that the total cost to produce each pair of headphones is $75. To account for research and development, distribution, marketing, and profit, the company sets the initial recommended retail price for these headphones at $225. The $150 difference ($225 - $75) is the markon. This is the amount initially added to the production cost to arrive at the product's launch price.
Example 3: Artisan Bakery
An artisan bakery calculates that the direct cost of ingredients and labor for baking one loaf of its specialty sourdough bread is $3. To cover expenses like oven maintenance, electricity, rent for the storefront, and to ensure profitability, the bakery sets the initial selling price for a loaf at $9. The $6 difference ($9 - $3) is the markon. This is the initial amount added to the direct cost of baking to determine the bread's first price on the shelf.
Simple Definition
Markon refers to the initial amount, often a percentage, that is added to a product's cost to determine its original list price. This is the starting point for pricing, before any subsequent adjustments. Any later increases or decreases to this price are then known as markups or markdowns, respectively.