A DVD player that costs $168 sells for a 30% markup based on the cost. What is the selling price of the DVD player?
The correct answer and explanation is:
To find the selling price of the DVD player, we need to calculate the markup first and then add it to the cost price.
- Calculate the markup:
The markup is 30% of the cost price, which is \$168. To calculate this, multiply the cost price by 30% (or 0.30).
Markup = \$168 × 0.30 = \$50.40
- Add the markup to the cost price:
Now, to find the selling price, add the markup to the original cost of the DVD player.
Selling Price = Cost Price + Markup
Selling Price = \$168 + \$50.40 = \$218.40
So, the selling price of the DVD player is \$218.40.
Explanation:
The selling price of any item is determined by adding the markup to the original cost. The markup percentage is based on the cost price, meaning it’s calculated using the cost before any additional charges. In this case, the DVD player was purchased for \$168, and the store applied a 30% markup. The markup is essentially the profit that the seller adds to the item’s cost to cover other expenses and earn a profit.
Markup is usually expressed as a percentage of the cost price, so the formula for calculating the markup is:
Markup = Cost Price × (Markup Percentage / 100)
Once the markup is calculated, it is added to the cost price to determine the final selling price. This approach helps the business to cover its costs (including overheads) and generate revenue. The selling price is what the customer pays, and it’s higher than the cost to allow the store to make a profit.