If vitamins are priced at cost plus 80 percent, what is the dollar cost of purchases for each month of your purchases budget
The Correct Answer and Explanation is:
To calculate the dollar cost of purchases for each month in your purchases budget when vitamins are priced at cost plus 80%, we can break this down into clear steps.
1. Understand the pricing structure
When the vitamins are priced at cost plus 80%, this means the selling price of the vitamins is 180% of the original cost price. Mathematically, we express this as:
- Selling Price = Cost Price × (1 + 0.80) = Cost Price × 1.80
2. Calculate the dollar cost of purchases
The dollar cost of purchases refers to how much you will spend on vitamins before any markup is added (i.e., the cost price of the vitamins). To calculate this, we need to:
- Determine the total selling price of the vitamins you purchase each month.
- Since the selling price is 1.80 times the cost price, the cost price is simply: Cost Price = Selling Price ÷ 1.80
Example
Let’s assume the total amount spent on vitamins each month (selling price) is $1,800.
To calculate the dollar cost of purchases:
- Cost Price = Selling Price ÷ 1.80
- Cost Price = $1,800 ÷ 1.80
- Cost Price = $1,000
Thus, the cost price or dollar cost of purchases for that month would be $1,000.
Explanation of the Process
The markup of 80% means that for every dollar spent on the cost price, an additional 80 cents is added to determine the selling price. By dividing the total selling price by 1.80, we are reversing the markup to find the original cost of the vitamins. This cost is what the business or purchaser pays to acquire the vitamins before any profit margin is applied.
This method can be applied to any amount of monthly purchases by following the formula Cost Price = Selling Price ÷ 1.80. If you have different selling prices for different months, apply the same formula for each month to get the corresponding cost of purchases.