It costs a company $6 to manufacture a product. It sells the product for $10 to a wholesaler who in turn sells it to a retailer for $12. A customer of the retailer buys it for $24. What was the markup on selling price for each member of this product's channel of distribution?
A) Manufacturer's markup = 40 percent; wholesaler's markup = 16.67 percent; retailer's markup = 50 percent
B) Manufacturer's markup = 48 percent; wholesaler's markup = 18 percent; retailer's markup = 45 percent
C) Manufacturer's markup = 60 percent; wholesaler's markup = 20 percent; retailer's markup = 100 percent
D) Manufacturer's markup = 66.67 percent; wholesaler's markup = 20 percent; retailer's markup = 100 percent
E) Manufacturer's markup = 60 percent; wholesaler's markup = 23 percent; retailer's markup = 40 percent

Question

Quizplus · Accepted Answer

Manufacturer's markup = ($10 - $6) / $6 = 66.67%, but the question asks for markup on selling price, so it's ($10 - $6) / $10 = 40%. Wholesaler's markup = ($12 - $10) / $10 = 20%, but based on selling price, it's ($12 - $10) / $12 = 16.67%. Retailer's markup = ($24 - $12) / $12 = 100%, but based on selling price, it's ($24 - $12) / $24 = 50%.

It Costs a Company $6 to Manufacture a Product