Final answer:
The formula for calculating markup percentage on absorption cost is Markup Percentage = (Selling Price - Cost Price) / Cost Price. Sales tax is calculated by multiplying the price by the sales tax rate and then adding it to the original amount. Average profit, or profit margin, is determined by the difference between the price and average cost.
Step-by-step explanation:
The correct formula for calculating markup percentage on absorption cost is: Markup Percentage = (Selling Price - Cost Price) / Cost Price. To find out the markup percentage, subtract the Cost Price from the Selling Price, and then divide this result by the Cost Price. Multiplying the resulting decimal by 100 will give you the markup percentage.
To calculate the amount of sales tax on an item, multiply the price by the rate of sales tax, which should be converted from a percentage to a decimal form. Once you have the amount of tax, add it to the original amount to find the total cost with tax.
Example: For a $150.00 item with a 10% sales tax assessed, the calculation would be: $150.00 x 0.10 = $15.00 of sales tax. Adding this to the original price, the total amount would be $150.00 + $15.00 = $165.00.
The term average profit defines the profit margin, which is the difference between the price and the average cost. If the price is higher than the average cost, the firm earns a profit. Conversely, if the price is lower, the firm experiences a loss.