Question

The selling price of office furniture at HML is $6000. The percent markup on cost if 40%. What is the actual cost of the office furniture?

Answer 1

The actual cost of the office furniture is $4285.71.

Step-by-step explanation:

To find the actual cost, we can use the formula:

`\[ \text{Actual Cost} = \frac{\text{Selling Price}}{1 + \text{Markup Percentage}} \]`

In this case, the selling price is $6000, and the markup percentage is 40%. First, convert the markup percentage to a decimal by dividing it by 100:
`\( (40)/(100) = 0.4 \).` Now, apply the formula:

`\[ \text{Actual Cost} = (6000)/(1 + 0.4) \]`

`\[ \text{Actual Cost} = (6000)/(1.4) = 4285.71 \]`

Therefore, the actual cost of the office furniture is $4285.71.

Understanding the formula is crucial. The markup percentage represents the proportion of the cost that is added to arrive at the selling price. By dividing the selling price by
`\(1 + \text{Markup Percentage}\),` we essentially remove the markup and find the original cost. In this scenario, the 40% markup means the selling price is 140% of the actual cost, and dividing by 1.4 achieves the cost reversal.

In business, this calculation is fundamental for determining profit margins and setting appropriate selling prices. It ensures that businesses cover their costs while generating a desired level of profit. Mastering such calculations is essential for effective financial management and pricing strategies in various industries.