M Studios buys cameras at a unit cost of $140. Their operating expense is 40% per unit of the selling price, and their desired unit operating profit is 25% of the selling price. What is M Studios' rate of mark-up on selling price?
A) 65%
B) 22.75%
C) 75%
D) 25%
E) 60%

Question

Quizplus · Accepted Answer

The selling price can be broken down into cost (C), operating expense (O), and profit (P), where O is 40% of the selling price (S), and P is 25% of S. The equation is C + O + P = S. Given C = $140, O = 0.4S, and P = 0.25S, we can find the mark-up on selling price by calculating (S - C) / S. Rearranging the equation S = C / (1 - O - P) gives S = $140 / (1 - 0.4 - 0.25) = $140 / 0.35 = $400. The mark-up on selling price is (S - C) / S = ($400 - $140) / $400 = $260 / $400 = 65%.

M Studios Buys Cameras at a Unit Cost of $140