Question

You are a speciality retailer for men's clothing and accessories. One of the lines you carry is called MyTie which makes handmade bowties and pocket squares. Recently MyTie has increased what it changes the wholesaler by 10%. You know the wholesaler used to buy bowties for $25.00 each. The wholesale margin will stay at 30%, and you have a standard practice of taking a 25% margin. What is the new retail selling price to the closest whole dollar assuming your retail margin is maintained (assume retail cost rounded to closest whole dollar in your calculations)?

A.$37
B.$52
C.$48
D.$45

Answer 1

After calculating the impact of a 10% increase in the wholesale cost and applying the retailer's margin of 25%, the new retail selling price of MyTie bowties to the nearest whole dollar is $52.

Step-by-step explanation:

To determine the new retail selling price of the bowties, we need to calculate the impact of the 10% increase in the wholesale price and then apply the retailer's margin.

First, let's calculate the new wholesale cost after a 10% price increase:
Old Wholesale Cost = $25.00
Increase = 10% of $25.00 = $2.50
New Wholesale Cost = $25.00 + $2.50 = $27.50

Next, let's find out what the wholesaler would sell it for if they maintain a 30% margin:
Wholesale Margin = 30%
Wholesale Selling Price = New Wholesale Cost / (1 - Wholesale Margin)
Wholesale Selling Price = $27.50 / (1 - 0.30)
Wholesale Selling Price = $27.50 / 0.70
Wholesale Selling Price = $39.29 (rounded to the nearest whole dollar is $39)

Finally, calculate the retailer's selling price while maintaining a 25% margin:
Retail Margin = 25%
Retail Selling Price = Wholesale Selling Price / (1 - Retail Margin)
Retail Selling Price = $39 / (1 - 0.25)
Retail Selling Price = $39 / 0.75
Retail Selling Price = $52.00

Therefore, the new retail selling price is $52 to the closest whole dollar.