oftware retailer uses a markup rate of 40%. If the retailer pays $25 each for computer games sold in its stores, how much do the games sell for? Answer: The markup is 40% of the $25 cost, so the markup is: (0. 40) * ($25) = $10 Then the selling price, being the cost plus markup, is: $25 + $10 = $35 Therefore the games sell for $35. 2) A golf pro shop pays its wholesaler $40 for a certain club, and then sells that club to golfers for $75.
What is the retail markup rate? Answer: The gross profit in dollars is calculated as sales price less cost: $75 – $40 = $35 The markup rate is then calculated: Markup (%) = Gross Profit / Cost *100 = $35 / $40 *100 = 87. 5% 3) A shoe store uses a 40% markup on cost. Find the cost of a pair of shoes that sells for $63. Answer: The cost of the shoes is calculated as follows: Selling Price = Cost + Markup ($) = Cost + (Markup (%) * Cost) $63 = Cost + (40% * Cost) $63 = Cost + (0. 4 * Cost) $63 = (1 + 0. 4) * Cost $63 = 1. 4 * Cost Cost = $63 / 1. 4 = $45 ) In 2009, Donna Manufacturing sold 100,000 widgets for $5 each, with a cost of goods sold of $2. What is the company’s margin %? Identify a way that Donna Manufacturing can increase its profit margin? Answer: First we have to calculate the gross profit: Gross Profit = Selling Price – Cost of Goods Sold = $5 – $2 = $3 Now we can calculate the margin: Margin (%) = Gross Profit / Sales * 100 = $3 / $5 * 100 = 60% Ways to increase the profit margin: – Decrease cost of material – Decrease cost of manufacturing – Increase sales price per unit – Decrease COGS )
The Essay on Cost, volume, and profit formulas
The cost-volume-profit analysis is a business tool which companies utilize in order to analyze the effects of changes on costs and volume in its profits. It has five major components namely, volume or level of activity, unit selling prices, variable cost per unit, total fixed cost, and sales mix. The volume of level of activity refers to the quantity of the product which is sold. Unit selling ...
