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The Nguyen Company sells beautiful oriental water fountains through wholesalers and retailers....

Question:

The Nguyen Company sells beautiful oriental water fountains through wholesalers and retailers. They suspect that the retailer is taking an extra 15% more in markup than they should, but Nguyen Management cannot prove it. The retail selling price is $1,199.99, and the manufacturing cost to the company is $425.00. The retail markup was 38%, and wholesale markup was 25%. Show all work.

A. What was the cost to the wholesaler?

B. What was the cost to the retailer?

C. What percentage markup did the producer make?

Calculating Retail Markup

Markup is the percentage difference between the wholesale cost and the retail cost. In some cases, there are two markups: one from manufacturer to wholesaler, and another from wholesaler to retailer.

Answer and Explanation:

Mark up % = mark up amount/selling price. mark up amount = selling price - cost.

Now, manufacturing cost to the company = $425. let the selling price to the wholesaler be "x". Thus mark up for the manufacturer = x-425. and markup % = (x-425)/x

Now, cost to the wholesaler = selling price of the manufacturer = x.

Wholesale mark-up = 25%.

Let the wholesaler's selling price be "y". Thus mark up = y-x and mark up % = (y-x)/y.

Therefore, (y-x)/y = 25% or 3y = 4x or y = 4/3x

cost to the retailer = y. retail selling price = $1,199.99. mark up = $1,199.99-y. Mark up % = ($1,199.99-y)/$1,199.99 = 38%

or, $1,199.99 - y = 0.38*$1,199.99

or $1,199.99 -y = 456 or y = 743.99

Answers

A. cost to the wholesaler = x. and 3y = 4x or x = 3/4y = 3/4*743.99 = $558

B. cost to the retailer = y = $743.99

C. % markup for the producer = (selling price for the producer - cost to the producer)/selling price for the producer

selling price for the producer = cost of the wholesaler = $558

% markup = (558-425)/558 = 23.83%


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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