Question

it costs a company $6 to manufacture a product. it sells the product for $10 to a wholesaler who in turn sells it to a retailer for $12. a customer of the retailer buys it for $24. what was the markup on the selling price for each member of this products channel of distribution?
multiple choice

• manufacturer’s markup = 40 percent; wholesaler’s markup = 16.67 percent; retailer’s markup = 50 percent
• manufacturer’s markup = 66.67 percent; wholesaler’s markup = 20 percent; retailer’s markup = 100 percent
• manufacturer’s markup = 60 percent; wholesaler’s markup = 20 percent; retailer’s markup = 100 percent
• manufacturer’s markup = 48 percent; wholesaler’s markup = 18 percent; retailer’s markup = 45 percent
• manufacturer’s markup = 60 percent; wholesaler’s markup = 23 percent; retailer’s markup = 40 percent

Explanation:

Step1: Calculate manufacturer's markup

Markup = $\frac{Selling\ Price - Cost}{Selling\ Price} \times 100\% = \frac{10 - 6}{10} \times 100\% = 40\%$

Step2: Calculate wholesaler's markup

Markup = $\frac{12 - 10}{12} \times 100\% \approx 16.67\%$

Step3: Calculate retailer's markup

Markup = $\frac{24 - 12}{24} \times 100\% = 50\%$

Answer:

Manufacturer’s markup = 40 percent; wholesaler’s markup = 16.67 percent; retailer’s markup = 50 percent