Question

For the next question, please read the following scenario carefully:

(a) Schwinn sells its bicycles to its retailers through its wholesalers,

(b) Schwinn’s trade-margin on its bicycles is 25% (of Schwinn’s S.P.),

(c) the wholesaler’s trade-margin (based on the wholesaler’s C.P.) is 50%,

(d) the retailer’s trade-margin is 100% (based on the retailer’s C.P.), and.

(e) the wholesaler’s S.P. for the average Schwinn bicycle is $ 180.

(f) What is Schwinn’s C.P. for this average bicycle?
a. $ 90
b. $ 96
c. $ 120
d. $ 180
e. $ 360

Answer 1

To find Schwinn's cost price (C.P.) for the average bicycle, we need to work backwards from the selling price (S.P.) of the wholesaler and consider the trade margins at each stage of the distribution chain. The cost price (C.P.) for the average bicycle is $120.

Step-by-step explanation:

To find Schwinn's cost price (C.P.) for the average bicycle, we need to work backwards from the selling price (S.P.) of the wholesaler and consider the trade margins at each stage of the distribution chain.

Since the wholesaler's S.P. for the average bicycle is $180 and their trade-margin is 50% based on their C.P., we can find their C.P. by dividing the S.P. by 1 plus the trade-margin percentage:

C.P. = S.P. / (1 + trade-margin)

For the wholesaler, the C.P. would be $180 / (1 + 0.50) = $120. This means that the wholesaler buys the bicycle from Schwinn for $120.

Therefore, the correct answer is (c) $120.