Question

A manufacturer sells a product for $5 per unit to a wholesaler who sells it at a markup of 60%, based on manufacturer selling price. The retailer adds another $2 and sells the product to the consumer. What is the retailer’s markup?

a. 20%muc, 25%musp

b. 25%muc, 20%musp

c. 60%muc, 37.5%musp

d. 37.5%muc, 60%musp

e. None of (a-d) above

Answer 1

Option (b) 25% muc, 20% musp

Step-by-step explanation:

Data provided in the question:

Selling cost of manufacturer = $5

Markup by wholesaler = 60%

Amount added by retailer = $2

Now,

Selling cost of wholesaler = $5 × (1 + Markup)

= $5 × (1 + 0.60)

= $8

thus,

Selling price of retailer = $8 + $2 = $10

Therefore,

%muc retailer = [ Amount added by retailer] ÷ [Selling price of wholesaler]

= $2 ÷ $8

= 0.25 or 25%

%musp retailer = [ Amount added by retailer] ÷ [Selling price of retailer]

= $2 ÷ $10

= 0.20 or 20%

Hence,

Option (b) 25% muc, 20% musp