2) FashionForward, a retail clothing store, is setting prices for its new line of designer jackets. The cost of each jacket is $100. The store decides to use a markup pricing strategy, applying a markup of 50% on the cost. The store also wants to understand the profit margin associated with this pricing strategy.
Given that the cost of each jacket is $100 and the markup percentage is 50%, which of the following statements correctly describes the markup and profit margin for the jackets?
In the given case, FashionForward uses a markup pricing strategy. Here’s how the markup and profit margin are calculated:
Markup = Cost × Markup Percentage = $100 × 0.50 = $50
Thus, the selling price is:
Selling Price = Cost + Markup = $100 + $50 = $150
Profit Margin: The profit margin is calculated as the ratio of profit to the selling price. Profit is the difference between the selling price and the cost:
Profit = Selling Price − Cost = $150 − $100 = $50
The profit margin is then:
Profit Margin = (Profit / Selling Price) x 100
Profit Margin =$50 / $150 × 100% = 33.33%
In the given case, FashionForward uses a markup pricing strategy. Here’s how the markup and profit margin are calculated:
Markup = Cost × Markup Percentage = $100 × 0.50 = $50
Thus, the selling price is:
Selling Price = Cost + Markup = $100 + $50 = $150
Profit Margin: The profit margin is calculated as the ratio of profit to the selling price. Profit is the difference between the selling price and the cost:
Profit = Selling Price − Cost = $150 − $100 = $50
The profit margin is then:
Profit Margin = (Profit / Selling Price) x 100
Profit Margin =$50 / $150 × 100% = 33.33%