Salestopia purchases rebuilt engines for resale. Recently, it purchased engines from a wholesaler for $4,908 less 37%, 16% and 3%. Operating costs are 57% of the cost of the engine. Salestopia usually marks up the engines by 54% of the selling price. If the engines were to be sold at a break-even price, then determine the markdown percentage.
A) 28.98%
B) 27.78%
C) 26.67%
D) 16.54%
E) 6.13%

Question

Quizplus · Accepted Answer

First, calculate the purchase price after discounts: $4,908 * (1 - 0.37) * (1 - 0.16) * (1 - 0.03) = $2,489.97 approximately. Operating costs are 57% of this cost, so $2,489.97 * 0.57 = $1,419.28. The total cost is $2,489.97 + $1,419.28 = $3,909.25. To break even, Salestopia needs to recover this total cost in the sale. If the markup is 54% of the selling price, then the cost represents 46% of the selling price (100% - 54%). Therefore, the break-even selling price is $3,909.25 / 0.46 = $8,498.37. The original selling price before the markdown would have been $4,908 (the price before any discounts). To find the markdown percentage, we calculate the difference between the original selling price and the break-even price, then divide by the original selling price: ($4,908 - $8,498.37) / $4,908 = -73.22%. However, this calculation does not align with the logic of the problem as it suggests an increase rather than a markdown. The correct approach is to find the selling price based on the markup formula and then calculate the markdown needed to reach the break-even price.Correcting the approach: The cost plus operating cost is the base cost. The selling price is determined by marking up this base cost. If the engines are sold at a break-even price, the markdown percentage is calculated from the difference between the intended selling price and the break-even price.The correct calculation involves determining the intended selling price based on the markup and then comparing it to the break-even price to find the markdown percentage. However, the provided solution steps incorrectly calculate the markdown based on the original price and discounts, leading to confusion.The correct approach should involve calculating the intended selling price with the markup and then finding the markdown percentage to reach the break-even price, which was not accurately pursued in the explanation. Therefore, the correct answer involves recalculating based on the correct interpretation of the markup and markdown in relation to the break-even price. Given the mistake in the calculation process, the correct answer (B) is identified based on the premise of finding the markdown percentage to adjust from the marked-up price to the break-even price, but the explanation provided does not accurately support this conclusion due to a miscalculation.

Salestopia Purchases Rebuilt Engines for Resale