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Nestea

Member

Registered: 2005-11-12

Posts: 9

The average rate of markup

Cantu Excavating Liquidators bought 350 coats at $80.00 each. In the first month, 175 were sold at the regular price of $192.00 each. Another 152 were sold in the second month at a "one-third-off" sale price. The remaining stock, consisting primarily of defective units, were cleared out in the third month at $75.00 each. The store's overhead is 50% of cost.

a) What was the average rate of markup?

Could anyone tell me the technique on this?!??!?!?!?!?
Help me find the Total cost for each month?

MathsIsFun

Administrator

Registered: 2005-01-21

Posts: 7,711

Re: The average rate of markup

Bought: 350 × $80 = $28,000

Sold:
175 × $192.00 = $33,600
152 × ($192.00)×(1-(1/3)) = 152 × $192×(2/3) = 152 × $128 = $19,456
(350-175-152) × $75.00 = 23 × $75.00 = $1,725
Total Sold = $54,781

a) What was the average rate of markup?
OK, here we need to define what markup is. I think of it as price vs marginal cost ... in other words excluding overheads:

Average rate of Markup = $54,781 / $28,000 = 1.956 = 196% (markup is usually expressed as a percentage)

[ If you must include overheads you would increase the cost base by 50%.  $28,000 plus 50% = $28,000 × 150% = $42,000, and the markup would be: $54,781 / $42,000 = 1.304 = 130% ]

Total cost per month:
Easiest way is to determine cost per unit: $80 plus 50% = $80 × 150% = $120

175 × $120 = $21,000
152 × $120 = $18,240
23 × $120 = $2,760

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"The physicists defer only to mathematicians, and the mathematicians defer only to God ..."  - Leon M. Lederman

Nestea

Member

Registered: 2005-11-12

Posts: 9

Re: The average rate of markup

THanks for the help! But the third month's cost is a negative price.