Asked by Jerry Powell on May 31, 2024
Verified
For a given dollar amount of mark-up, which will be the larger number: the rate of mark-up on cost or the rate of mark-up on selling price? Explain.
Mark-Up
The additional amount added to the cost price of goods to cover overhead and profit, resulting in the selling price.
Selling Price
The price at which an item or service is sold to a buyer, potentially including taxes, shipping, and other fees.
- Understand the difference at a conceptual level between mark-up rates based on cost versus those on selling price, and describe situations in which one might surpass 100%.
Verified Answer
TL
Thomas LourdeauJun 06, 2024
Final Answer :
Both quantities have the same numerator, but the rate of mark-up has the smaller denominator (since C< S).Therefore, the rate of mark-up is larger than the gross profit margin.
Learning Objectives
- Understand the difference at a conceptual level between mark-up rates based on cost versus those on selling price, and describe situations in which one might surpass 100%.