Question

There are three members of this channel of distribution: a manufacturer, a wholesaler and a retailer. The manufacturer makes chairs. The wholesaler buys chairs from the manufacturer and the retailer buys chairs from the wholesaler. For each member of the distribution channel you need to compute the correct selling price AND you need to show how you checked that your answer is correct. The basic formula to use for determining selling price is: selling price per chair = total cost per chair + the desired markup per chair. In your answers show the formula you used in words with the numbers properly labeled in parentheses. This way if you make an error I can see if the error is in the formula used or in the numbers used. You will not receive any points for just submitting a price without formulas and checks. An example of a company that wants a 50% markup on its cost. (worth 3 points): Selling price ($10.00)= cost ($5.00)+ markup on cost ($5.00) (worth 2 points): Check: Selling price ($10.00) - cost ($5.00)= markup of ($5.00). Desired markup = markup ($5.00)/cost($5.00)=100% The check tells me this is the incorrect selling price. This company wanted a 50% markup on cost, not 100%. The pricing formula indicates that the cost number is correct, but the markup number is incorrect. This formula needs to be modified to correct how the markup is computed.

A. The Manufacturer ( 3 points for selling price, 2 points for the answer check) The total cost of producing one chair for this manufacturer is $20.00 per chair. The selling price this manufacturer wants includes a 60% markup on the total cost of each chair. Please answer the following two questions.
a.1. What is the selling price per chair that the manufacturer charges the wholesaler?
a.2. Show a check that proves the selling price is correct

Answer 1

The manufacturer should charge $32.00 per chair to the wholesaler. This price includes a 60% markup on the total production cost of $20.00 per chair, resulting in a markup of $12.00 per chair. The calculation was confirmed correct by checking that the percentage markup on cost is exactly 60%.

Step-by-step explanation:

To calculate the selling price per chair that the manufacturer charges the wholesaler, we will apply the given formula:

Selling price per chair = Total cost per chair + Desired markup on total cost per chair.

Given that the total cost of producing one chair is $20.00 and the manufacturer desires a 60% markup on its total cost, we first need to calculate the markup in dollars:

Markup = Total cost per chair × Desired markup percentage = $20.00 × 60% = $20.00 × 0.60 = $12.00.

Now we can find the selling price:

Selling price per chair = Total cost per chair + Markup = $20.00 + $12.00 = $32.00.

To check the correctness of this selling price:

Selling price per chair - Total cost per chair = Markup in dollars

$32.00 - $20.00 = $12.00

Percentage of markup on cost = (Markup in dollars / Total cost per chair) × 100 = ($12.00 / $20.00) × 100 = 60%

This confirms that the markup is correctly calculated at 60% of the cost, making $32.00 the correct selling price for the manufacturer to charge the wholesaler.