A hobby store normally applies a 50% markup on wholesale cost...

Question

A hobby store normally applies a 50% markup on wholesale cost to determine retail prices. The store now wants to clear older inventory that was purchased at 75% of the current wholesale cost. What percentage discount on the retail price should the store offer on these older items if they want to maintain a 20% profit margin based on what they originally paid for them?

A. 20%
B. 30%
C. 33(1/3)%
D. 40%
E. 50%

Show Answer

Official Answer

D

A. 20%
B. 30%
C. 33(1/3)%
D. 40%
E. 50%

KevoK · Answer

Hi, not an expert but I want to chime in and see if I can help.

Assume the normal wholesale cost is 100.

The store normally apply a 50% markup over the wholesale cost, so the price markup is 150% * Wholesale = 150

The older inventory is purchased at 75% of the wholesale cost, so it is 75% * Wholesale = 75

Because we want a 20% profit over what was paid, our target price is: 20% * 75 + 75 = 90

So the store should discount: 150 - 90 = 60

And the percent of discount should be 60 / 90 = 2/5 which is  40%

mattisweb · Answer

Assume current retail cost to be 100. 
c = 100
Apply 50% Markup = 150 = current retail price.

Old Retail Cost therefore: 75% * 100 = 75
Current retail price 150, needs to be discounted for old stock, to get 20% profit on the 75$ cost. Key being the word "originally paid here". 
75 * (12/10) = 15 * 6 = 90

Discount on current prices (key word "retail price", meaning they apply the current prices rn, and need to determine new pricing for the old items): ((90-150)/150) * 100 
-> -60/150 * 100 = - 60 * 2/3 = -40%

ANS: D

saif18060 · Answer

Assume, Wholesale Price = 100 tk 
 Retail price = 150 
Previously , Wholesale price = 75 tk .
20% of wholesale Price = 15 tk
Retail (20% profit Price should be (75+15 ) = 90 tk 
Disscoount should be ( 150-90)=60 tk 
Percentage = (60*100)/150 = 40%

ektalakra · Answer

if the old wholesale cost is 75 and as per this" A hobby store normally applies a 50% markup on wholesale cost to determine retail prices" would not the Markup/retail price be 112.5 ... if markup is taken as 150 , we are considering a markup of 50% over the current wholesale price which is 100. can anyone guide here. confused about the language

glagad · Answer

I have the same question and perhaps errored around the same part of taking the Selling price as 50% of the older cost (which is 0.75 of W.C)

Bunuel · Answer

The wording is a bit messy, but this is what it implies. “Wholesale cost” here is essentially the current wholesale price. If the current wholesale price is $100, the normal retail price is $150. The older inventory was purchased at 75% of the wholesale price, so the store paid $75. To keep a 20% profit based on what they paid, the target selling price is $90. Going from $150 down to $90 is a $60 reduction, which is a 40% discount.

A hobby store normally applies a 50% markup on wholesale cost...

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A hobby store normally applies a 50% markup on wholesale cost...

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