Copyright

Ski Market sells snowboards. Ski Market knows that the maximum people will pay for the snowboards...

Question:

Ski Market sells snowboards. Ski Market knows that the maximum people will pay for the snowboards is $129.99. Ski Market is convinced that it needs a 45% markup based on cost. What is the maximum that Ski Market can pay to its supplier for the snowboards?

Markup and Selling Price:

The selling price of a unit of any product is usually determined by adding the markup value to the cost price where the markup is governed by a predetermined desired profit percentage. The total cost incurred usually consists of direct costs such as material and labor costs and the allocated indirect costs.

Answer and Explanation:

The calculated value of the maximum amount that Ski Market can pay to the supplier for the snowboards is $89.65.

The maximum purchase price which can be paid to the supplier is given by:

  • = Maximum price that people would pay for the snowboards / (1 + markup percentage)
  • {eq}= \dfrac{\$129.99}{(1 + 45\%)} {/eq}
  • {eq}= \dfrac{\$129.99}{1.45} {/eq}
  • = $89.65

Learn more about this topic:

Loading...
How to Calculate Markup: Definition & Formula

from Principles of Marketing: Help and Review

Chapter 12 / Lesson 22
73K

Related to this Question

Explore our homework questions and answers library