Question 1

Murry, a retailer, marks up hardware 28% on the selling price. If an electric saw costs $324.00, the selling price would be $414.72.

Accepted Answer

Let x be the selling price of the electric saw.
We know that:
x = 1.28 * 324
x = $414.72

So the statement "If an electric saw costs $324.00, the selling price would be $414.72" is actually true. Therefore, the answer should be A, not B.

Question 2

If costs and expenses are greater than the markup, for a given period, the difference is called:
A) net loss
B) reduced price
C) markdown
D) gross margin

Accepted Answer

If costs and expenses are greater than the markup, the business will experience a net loss, meaning it is losing money overall.

Question 3

A markup based on cost is generally used by retailers.

Accepted Answer

False

Question 4

Markup is also referred to as:
A) gross margin
B) gross profit
C) both gross profit and gross margin
D) price differential

Accepted Answer

Markup is the difference between the cost of a product and its selling price. This is the same as gross profit or gross margin, which represents the amount of money made on a product after subtracting the cost of goods sold. Therefore, both choice A and B are incorrect, and choice D is not a commonly used term in accounting or business.

Question 5

The cost of a fur coat, assuming a $311.50 markup, which is a 35% markup on selling price, is $202.48.

Accepted Answer

We can use the formula:

selling price = cost + markup

Let's denote the cost as C and the selling price as S.

We know that there is a $311.50 markup, so:

S = C + $311.50

We also know that the markup is 35% of the selling price, or:

$311.50 = 0.35S

Solving for S, we get:

S = $889.29

Now we can solve for the cost:

C = S - markup
C = $889.29 - $311.50
C = $577.79

Therefore, the cost of the fur coat is $577.79, which is not the same as the given value of $202.48, so the answer is B) False.

Question 6

A microwave was originally priced at $440.00. If it was subsequently reduced by 15%, the sales price would be $374.00.

Accepted Answer

To check, we can calculate the reduction amount: $440.00 x 0.15 = $66.00. Then subtract that from the original price: $440.00 - $66.00 = $374.00, confirming that the sales price is indeed $374.00.

Question 7

Tree-Mark Industries pays $90.00 for unfinished wood furniture and sells it at a markup of 35% o? cost. The selling price is $121.50.

Accepted Answer

To check if the answer is true or false, we can use the formula:

Selling Price = Cost + Markup
Markup = Cost x 35%

Let's plug in the given values:

$121.50 = $90.00 + Markup
Markup = $90.00 x 35% = $31.50

Now let's add the cost and markup:

Cost + Markup = $90.00 + $31.50 = $121.50

So the selling price matches the calculated cost and markup, which means the answer is true.

Question 8

Markup represents the amount of the selling price needed to cover operating expenses an? overhead.

Accepted Answer

Markup is the amount added to the cost of a product or service to comprise the selling price. It also includes operating expenses and overhead, which are the costs of doing business that cannot be directly traced to a particular product or service. Therefore, the statement is true.

Question 9

By using a formula, the percent markup based on selling price can be converted to percent markup based on cost.

Accepted Answer

The percent markup based on selling price can be converted to percent markup based on cost by using a formula. This is because both percentages are related to the difference between the cost and the selling price, but they use different bases (selling price vs. cost) for the calculation.

Question 10

When comparing markup based on cost to markup based on selling price:
A) none of these
B) all else being equal, markup based on cost will result in a higher markup rate
C) markup based on cost provides more profit for the business
D) when using markup based on selling price, cost can never be determined

Accepted Answer

Markup based on cost will result in a higher markup rate compared to markup based on selling price. For example, if the cost of a product is $10 and the desired markup is 50%, then the selling price would be $15 using a markup based on cost. However, with markup based on selling price, the selling price would have to be $20 to achieve the same 50% markup, resulting in a lower markup rate.

Question 11

Cost is equal to markup plus selling price.

Accepted Answer

Cost is equal to selling price minus markup, not plus.

Question 12

If a product is marked up, the new price is called the reduced price.

Accepted Answer

If a product is marked up, the new price is called the marked up price or the selling price. The reduced price would refer to a price decrease from the original or regular price.

Question 13

The amount a business gets to keep, after paying for all costs and expenses, is termed:
A) gross margin
B) gross profit
C) net loss
D) net profit

Accepted Answer

Net profit is the amount a business gets to keep after deducting all expenses and costs from its revenue. It is the final amount of profit earned by a business. Gross margin and gross profit are also important metrics in the financial statements, but they represent profits before subtracting all expenses. Net loss means the company's expenses exceed earnings, resulting in a negative overall profit.

Question 14

If patio furniture costs $500.00 and sells for $550.00, the percent markup based on selling price is 10%.

Accepted Answer

The percent markup based on selling price is calculated as (Selling Price - Cost Price) / Selling Price. So, it is ($550 - $500) / $550 = $50 / $550 = 0.0909 or 9.09%.

Question 15

The selling price of merchandise minus the cost equals the markdown.

Accepted Answer

The selling price minus the cost equals the profit. The markdown is the difference between the original price and the selling price.

Question 16

Pat's Deli makes onion buns that cost $.48 each. 10 percent of the onion buns will spoil and be thrown away. Pat wants a 40 percent markup based on cost. Pat produces 800 onion buns. Each onion bun should sell for:
A) $0.86
B) $0.80
C) $0.75
D) $0.69

Accepted Answer

The answer of Pat's Deli makes onion buns that cost...

Question 17

The percent of markdown can be calculated by using the percentage formula which is:
A) rate equals portion divided by base
B) base equals portion divided by rate
C) portion equals rate divided by base
D) rate equals portion times base

Accepted Answer

The percentage formula is rate equals portion divided by base. This formula is used to calculate the percent of markdown by dividing the amount of reduction (portion) by the original selling price (base) and expressing it as a percentage (rate).

Question 18

Markdowns are typically used:
A) all of these are appropriate uses of markdowns
B) when merchandise is priced too high to begin with
C) when merchandise goes out of style, or is seasonal
D) when pricing perishables

Accepted Answer

Markdowns can be used for various reasons such as clearing out seasonal merchandise, promoting sales, offering discounts to customers, reducing excess inventory, etc.

Question 19

Markdowns are usually the result of:
A) lack of seasonality
B) changes in style
C) absence of special promotions
D) absence of competition

Accepted Answer

Markdowns are usually the result of changes in style, as retailers need to make room for new inventory and get rid of older styles that may not be as popular anymore.

Question 20

After finding the first selling price upon which a series of markup or markdowns will be based, all subsequent changes:
A) will result in a profit when using markups, and a loss using markdowns
B) will be based upon selling price
C) will be based on cost
D) will be based on either cost or selling price for markups, and selling price for markdowns

Accepted Answer

Subsequent changes in pricing (markups or markdowns) are typically based on the selling price, not the original cost. This approach allows for consistent pricing strategies that reflect the current market value of the product.

Quiz 9: Markup and Markdown

Murry, a retailer, marks up hardware 28% on the selling price. If an electric saw costs $324.00, the selling price would be $414.72.

If costs and expenses are greater than the markup, for a given period, the difference is called:

A markup based on cost is generally used by retailers.

Markup is also referred to as:

The cost of a fur coat, assuming a $311.50 markup, which is a 35% markup on selling price, is $202.48.

A microwave was originally priced at $440.00. If it was subsequently reduced by 15%, the sales price would be $374.00.

Tree-Mark Industries pays $90.00 for unfinished wood furniture and sells it at a markup of 35% o? cost. The selling price is $121.50.

Markup represents the amount of the selling price needed to cover operating expenses an? overhead.

By using a formula, the percent markup based on selling price can be converted to percent markup based on cost.

When comparing markup based on cost to markup based on selling price:

Cost is equal to markup plus selling price.

If a product is marked up, the new price is called the reduced price.

The amount a business gets to keep, after paying for all costs and expenses, is termed:

If patio furniture costs $500.00 and sells for $550.00, the percent markup based on selling price is 10%.

The selling price of merchandise minus the cost equals the markdown.

Pat's Deli makes onion buns that cost $.48 each. 10 percent of the onion buns will spoil and be thrown away. Pat wants a 40 percent markup based on cost. Pat produces 800 onion buns. Each onion bun should sell for:

The percent of markdown can be calculated by using the percentage formula which is:

Markdowns are typically used:

Markdowns are usually the result of:

After finding the first selling price upon which a series of markup or markdowns will be based, all subsequent changes: