Question

Margo purchases bulk teas from a warehouse and marks up those prices by 40% for retail sale. When teas go unsold for more than two months, Margo marks down the retail price by 40%. She says that she is breaking Even that is, she is getting the same price for the tea that she paid for it. Is she correct? Complete the explanation.

Answer 1

Margo is incorrect.She is selling tea in loss.

Explanation:

Let the cost price of teas when purchased from the warehouse = $ x

Then Margo marks retail price of teas a = x + 0.40 x

a = x (1 +0.40)

a = 1.4 x

After 2 months she marks down the retail price by 40% then retail price becomes b = 1.4 x - 40% of 1.4 x

b = 1.4 x - 0.4 x 1.4 x

b = 1.4 x - 0.56 x

b = 0.84 x

Difference between cost price and selling price b is = x - .84 x

= 0.16 x

which shows now Margo is selling under the cost price so Margo is incorrect.