Which of the following is a TRUE statement about markups?
A) A firm can lose money even when using a high markup.
B) Markup percents are computed as a percent of the cost of the product.
C) It's easier for a producer to administer the prices consumers pay for products if the markup used varies from one intermediary to the next.
D) The lower the markup, the lower the profit.
E) None of these statements about markups is true.

Question

Quizplus · Accepted Answer

A firm can lose money even when using a high markup because the markup is calculated based on the cost of the product, not the overall profitability of the business. So, if the cost of producing the product is too high, even a high markup may not be enough to make a profit. B is incorrect because markup percents are computed as a percent of the selling price, not the cost. C is incorrect because it would not be easier for a producer to administer prices if the markup used varies from one intermediary to the next. D is incorrect because the markup does not necessarily determine the profit, as stated in A.

Which of the Following Is a TRUE Statement About Markups