purchases chrome rims for $710 (for a set of 4) and uses a markup of 55%...

Question: purchases chrome rims for {eq}\$710 {/eq} (for a set of {eq}4 {/eq}) and uses a markup of {eq}55 \% {/eq} on selling price. What will be the percent markup on cost? Give your answer as a percentage and round to the nearest percent.

Markup Value:

The unit markup value is the profit amount added to the unit cost of a product to come up with the unit selling price. The markup amount may be expressed as a percentage of the unit selling price of the product or the unit cost of the product where the cost usually consists of the manufacturing cost and the selling & administrative cost.

Answer and Explanation:

The calculated value of the percent markup on the cost is 122.59%.

If the markup amount is m, the selling price (s) is given by:

  • = Purchase cost + m
  • = $710 + m

The markup amount m is also given by:

  • = 55% * selling price
  • = 55% * s

On using the above two equations we get,

  • s = $710 + 55% * s
  • 45% * s = $710
  • {eq}s = \dfrac{\$710}{45\%} {/eq}
  • s = $1,582.51

The markup amount (m) is given by:

  • = 55% * $1,582.51
  • = $870.38

The percent markup on cost is given by:

  • = Markup amount / purchase cost
  • {eq}= \dfrac{\$870.38}{\$710} {/eq}
  • = 122.59%

Learn more about this topic:

How to Calculate Markup: Definition & Formula

from Principles of Marketing: Help and Review

Chapter 12 / Lesson 22

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