Alora Company produces a product that has a manufacturing cost of $40 per unit. Alora's policy is to charge a price equal to cost plus $25%. The 25% is pure profit to Alora.

Question

Quizplus · Accepted Answer

The 25% added to the cost is not pure profit; it is a markup on the cost. The profit is the difference between the selling price and the manufacturing cost, which is less than 25% of the selling price.

Alora Company Produces a Product That Has a Manufacturing Cost