What is defined as the difference between merchandise cost and selling price?

The correct answer is markup, which refers to the amount added to the cost of merchandise to determine its selling price. Markup is a crucial concept in retail and sales because it directly influences profitability. When a business purchases inventory, it incurs a cost. To cover expenses and generate profit, businesses set a selling price that exceeds this cost. The difference between this selling price and the original cost of the merchandise is the markup.

This concept is essential not only for pricing strategies but also for financial planning within a funeral service business, ensuring that the services and products offered provide a sufficient return on investment. Understanding markup helps professionals in this field manage costs and set competitive yet profitable prices for the services and products they provide to clients.

In contrast, the other concepts—payments, markup rate, and profit margin—represent different aspects of financial transactions and pricing strategies but do not directly define the difference between merchandise cost and selling price. Payment pertains to the transaction itself, the markup rate refers to the percentage of markup over the cost, and profit margin indicates the overall profit relative to sales, which encompasses more than just the markup.