A company's 2013 income statement reported the following for the year ended December 31, 2013: $\begin{array} { | l | l | }
\hline \text { Sales revenue } & \$ 453 \
\hline \text { Sales returns } & 6 \
\hline \text { Cost of goods sold } & 270 \
\hline \text { Expenses } & 126 \
\hline \text { Net income } & \$ 51 \
\hline
\end{array}$
Based only on the above data, the (a) average markup on cost, and (b) the average markup on selling price were: $\begin{array}{|l|l|l|}
\hline &\text { (a) Mark-up on a cost } & \text { (b) Mark-up on selling price } \
\hline 1&13.60 \% & 7.40 \% \
\hline 2&59.60 \% & 39.70 \% \\hline 3&60.00 \% & 40.00 \% \
\hline 4&65.56 \% & 39.60 \% \
\hline
\end{array}$

Question

A company's 2013 income statement reported the following for the year ended December 31, 2013: $\begin{array} { | l | l | } 
\hline \text { Sales revenue } & \$ 453 \
\hline \text { Sales returns } & 6 \
\hline \text { Cost of goods sold } & 270 \
\hline \text { Expenses } & 126 \
\hline \text { Net income } & \$ 51 \
\hline
\end{array}$
Based only on the above data, the (a) average markup on cost, and (b) the average markup on selling price were: $\begin{array}{|l|l|l|}
\hline &\text { (a) Mark-up on a cost } & \text { (b) Mark-up on selling price } \
\hline 1&13.60 \% & 7.40 \% \
\hline 2&59.60 \% & 39.70 \% \\hline 3&60.00 \% & 40.00 \% \
\hline 4&65.56 \% & 39.60 \% \
\hline
\end{array}$

Quizplus · Accepted Answer

To calculate the average markup on cost, we use the formula: $\frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Cost of Goods Sold}} \times 100$. Net Sales is Sales Revenue minus Sales Returns, which is $453 - 6 = 447$. So, the markup on cost is $\frac{447 - 270}{270} \times 100 = 65.56\%$.For the average markup on selling price, we use the formula: $\frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \times 100$. Using the Net Sales calculated above, the markup on selling price is $\frac{447 - 270}{447} \times 100 = 39.60\%$.

A Company's 2013 Income Statement Reported the Following for the Year