Question

Count Basie Pictures purchases wooden picture frames in bulk for $772 each and marks them up 140% of the cost. The overhead rate is estimated to be 20% of the selling price. What is the net profit rate on each frame?

a. 11.2%
b. 15.8%
c. 20.4%
d. None of above

Answer 1

The net profit rate on each frame is 80%.

Step-by-step explanation:

To find the net profit rate on each frame, we need to calculate the selling price of the frames and then deduct the overhead cost. First, let's calculate the selling price:

Mark-up = 140% of the cost

Mark-up amount = 140/100 * $772 = $1080.8

Selling price = Cost + Mark-up amount = $772 + $1080.8 = $1852.8

Now, let's calculate the overhead cost:

Overhead rate = 20% of the selling price

Overhead cost = 20/100 * $1852.8 = $370.56

Net profit rate = (Selling price - Overhead cost) / Selling price * 100

Net profit rate = ($1852.8 - $370.56) / $1852.8 * 100 = 80%

The net profit rate on each frame is 80%.