Aiwa Industries sells directly to auto parts retailers and is trying to set a price on a radar detector so that its retailers can sell it for $100. If the retailers need a 30 percent markup--and Aiwa can produce the item for $35--what markup could Aiwa take for itself?
A) 35%
B) 100%
C) 30%
D) 70%
E) 50%

Question

Quizplus · Accepted Answer

Retailers sell the radar detector for $100 with a 30% markup, meaning their cost is $100 / 1.30 = $76.92. Aiwa's production cost is $35, so Aiwa can sell it to retailers for $76.92, allowing a markup of ($76.92 - $35) / $35 = 1.198 or approximately 50%.

Aiwa Industries Sells Directly to Auto Parts Retailers and Is