An ad agency may need to purchase photographs and illustrations from an outside supplier for its client. The agency pays the outside supplier a fee and adds a(n) , usually 17.65 percent, to the client's bill.

Markup

Explanation:

Markup (or price spread) is the difference between the selling amount of a good or service and cost. It is mostly in the form of a percentage over the cost. A markup is included into the entire cost made by the producer of a good or service so as to take care of the costs of undergoing a business transaction and to make a profit.

To estimate the markup amount, we make use of the formula:

markup = gross profit/wholesale cost.

While,

Gross profit =markup * wholesale cost

The final retail sticker price = gross profit + wholesale cost

To develop an ad requires the services of people except there is an in-house talent that is readily available, people such as actors, voice talent and videographers are contacted to get the job and Ad ready. Commissions mostly do not show those forms of expenses, though. In such situations, the standard procedure is to add 17.65 percent to the costs incurred by the producer bill.

Another notable example can be like this, a radio ad employed the service of a Senami, who is a voice talented individual for a radio ad. She was paid $85, the client will be billed $100 (17.65 percent of 85 is 15). The $15 difference is the agency commission.

Hope this duly explain our answer!

MARKUP

Explanation:

it takes people to produce an ad successfully. Except there is a great talent at your disposal, you must hire people such as videographers, voice talent, and actors to ensure your ad is done successfully. In this kind of situation, it is not commission that is paid as it does not cover such expenses, however what is paid is markup, a standard practice which sees the agency pay 17.65 percent to those costs on the bill presented.