Question

A hardware store bought a gross (12 dozen) of hammers, paying $602.40 for the total order. The retailer estimated operating expenses for this product to be 35% of sales, and wanted a net profit of 5% of sales. The retailer expected no markdowns. What retail selling price should be set for each hammer?

Answer 1

The hardware store should set the retail selling price per hammer at approximately $6.97917 to cover the cost, operating expenses, and desired net profit, potentially rounding up to $6.99 or $7.00 for a clean retail price.

Step-by-step explanation:

Calculating the Retail Selling Price Per Hammer

The hardware store bought a gross of hammers at a total cost of $602.40. To determine the retail selling price per hammer, we must first calculate the total number of hammers, which is 12 dozen or 144 hammers. Then, we calculate the cost per hammer by dividing the total cost by the number of hammers: $602.40 / 144 hammers = $4.1875 per hammer. The store's operating expenses are 35% of sales, and the desired net profit is 5% of sales.

To calculate the retail price, we need to account for both the cost per hammer and the additional percentages for operating expenses and net profit. This implies that the cost constitutes 60% of the retail price (100% - 35% - 5%). Therefore, we set up the equation: $4.1875 / 0.60 = $6.97917 per hammer. To ensure a tidy retail price, the store may round this up to a nearby figure, such as $6.99 or $7.00 per hammer.