A firm estimates that consumers will pay $50 for its sweaters. If it requires a 30 percent markup, it must manufacture the sweaters for no more than $35 (when selling direct).

Question

Quizplus · Accepted Answer

A 30% markup on the manufacturing cost means the selling price is 130% of the cost. If the selling price is $50, then $50 is 130% of the manufacturing cost. Solving for the manufacturing cost gives $50 / 1.3 = $38.46, which is more than $35, so the statement is true.

A Firm Estimates That Consumers Will Pay $50 for Its