Question

Standard Appliances obtains refrigerators for $1,550 less 28% and 10%. Standard's overhead is 19% of the selling price of $1,615. A scratched demonstrator unit from their floor display was cleared out for $1,270.

a. What is the regular rate of markup on cost for a demonstrator unit?
%
Round to two decimal places

b. What is the rate of markdown on the demonstrator unit?
%
Round to two decimal places

c. What is the operating profit or loss on the demostrator unit?

Round to the nearest cent

d. What is the rate of markup on cost that was actually realized for the scratched demonstrator unit?
%
Round to two decimal places

Answer 1

a. The regular rate of markup on cost for a demonstrator unit is 31.76%. b. The rate of markdown on the demonstrator unit is 21.40%. c. The operating profit on the demonstrator unit is $306.85. d. The rate of markup on cost that was actually realized for the scratched demonstrator unit is 31.65%.

a. To calculate the regular rate of markup on cost for a demonstrator unit, we need to determine the cost price of the unit. We know that the selling price is $1,270 and the overhead is 19% of the selling price. So, the overhead cost is $1,615 * 0.19 = $306.85.

Subtracting the overhead cost from the selling price gives us the cost price: $1,270 - $306.85 = $963.15. Now we can calculate the markup on cost:

Markup on cost = (Selling price - Cost price) / Cost price x 100%

= ($1,270 - $963.15) / $963.15 x 100% = 31.76%.

Therefore, the regular rate of markup on cost for a demonstrator unit is 31.76%.

b. The rate of markdown on the demonstrator unit can be calculated by determining the markdown amount and dividing it by the original selling price. The markdown amount is $1,615 - $1,270 = $345. Dividing the markdown amount by the original selling price gives us:

Rate of markdown = Markdown amount / Original selling price x 100%

= $345 / $1,615 x 100% = 21.40%.

Therefore, the rate of markdown on the demonstrator unit is 21.40%.

c. The operating profit or loss on the demonstrator unit can be calculated by subtracting the cost price from the selling price. The cost price is $963.15 and the selling price is $1,270, so: Operating profit or loss = Selling price - Cost price = $1,270 - $963.15 = $306.85. Therefore, the operating profit on the demonstrator unit is $306.85.

d. To calculate the rate of markup on cost that was actually realized for the scratched demonstrator unit, we need to determine the cost price of the unit. We know that the selling price is $1,270 and the rate of markup on cost is 31.76%. So, we can rearrange the markup on cost formula to solve for the cost price:

Cost price = Selling price / (1 + Rate of markup on cost) = $1,270 / (1 + 0.3176) = $1,270 / 1.3176 ≈ $964.05.

Now we can calculate the realized markup on cost:

Realized markup on cost = (Selling price - Cost price) / Cost price x 100%

= ($1,270 - $964.05) / $964.05 x 100% ≈ 31.65%.

Therefore, the rate of markup on cost that was actually realized for the scratched demonstrator unit is 31.65%.