Assume an item costs $2.00. If the firm wants a markup of 40% based on the selling price, what...

Question:

Assume an item costs $2.00.

If the firm wants a markup of 40% based on the selling price, what would be the final price?

How to Calculate Markup:

Markup refers to the amount (usually expressed as a percentage of the purchase price) that is added to the cost of a product to calculate the selling price. The aim is for the markup amount to cover the operating expenses and generate profit.

Answer and Explanation:


Remeber that selling price = cost + markup:

Cost per item $2.00
Markup percentage 40%
Markup amount $0.80
($2 x 0.40)
Final Selling Price $2.80



Learn more about this topic:

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How to Calculate Markup: Definition & Formula

from Principles of Marketing: Help and Review

Chapter 12 / Lesson 22
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