“I am confused between the right answer and thinking that mark up as a percentage of cost gives us a profit of $108. Please help”

The question states “There is a requirement to make a mark-up of 30%.” – This means your sales price of $400 needs to include a 30% mark-up on your costs or put another way must 130% of your costs. To get your $108 you are multiplying the $360 cost by 30%. This is of no relevance, you’ve just calculated what 30% of your production costs are. To achieve a mark-up of 30% on a sales price of $400 your sales price must be 130% of your costs: Therefore – $400 / 1.3 = $307.69 – Our costs must be $307.69 in order to achieve for $400 to be a 30% mark-up. They’re currently $360. We have a deficit or cost gap of $52.31 ($360 – $307.69)

100 and 130 are percentages, the price of the product is $400, and we know that this includes a mark-up of 30%. Therefore, $400/130 (100% cost plus the 30% mark up) then times by 100%. This gives you the target cost of £307.69. From this you can then calculate the cost gap.

We use cookies to improve your experience on our site and to show you relevant advertising.To find out more, read our updated privacy policy and cookie policy.OkRead more

Cath says

October 23, 2018 at 12:18 amThanks Melanie – perfect explanation …

benwhittington says

June 26, 2018 at 7:59 pmHi marilynmabhikwa

“I am confused between the right answer and thinking that mark up as a percentage of cost gives us a profit of $108. Please help”

The question states “There is a requirement to make a mark-up of 30%.” – This means your sales price of $400 needs to include a 30% mark-up on your costs or put another way must 130% of your costs.

To get your $108 you are multiplying the $360 cost by 30%. This is of no relevance, you’ve just calculated what 30% of your production costs are. To achieve a mark-up of 30% on a sales price of $400 your sales price must be 130% of your costs:

Therefore – $400 / 1.3 = $307.69 – Our costs must be $307.69 in order to achieve for $400 to be a 30% mark-up. They’re currently $360. We have a deficit or cost gap of $52.31 ($360 – $307.69)

ryanmacd says

April 12, 2018 at 5:16 amPlease assist not sure how you get 100 and 130.

melanietrapp says

April 27, 2018 at 3:19 pm100 and 130 are percentages, the price of the product is $400, and we know that this includes a mark-up of 30%. Therefore, $400/130 (100% cost plus the 30% mark up) then times by 100%. This gives you the target cost of £307.69. From this you can then calculate the cost gap.

Hope this helps!

marilynmabhikwa says

June 12, 2018 at 8:36 amI am confused between the right answer and thinking that mark up as a percentage of cost gives us a profit of $108. Please help