If a product is priced at $180 and is based on a 35% markup of cost, the product cost is approximately what?

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Prepare for the AAMI Small Business Management Test with flashcards and multiple choice questions; each question comes with hints and explanations. Get exam ready!

Multiple Choice

If a product is priced at $180 and is based on a 35% markup of cost, the product cost is approximately what?

Explanation:
When a price is set using a markup on cost, the selling price equals the cost times (1 + the markup rate). Here the markup is 35%, so Selling price = Cost × 1.35. To find the cost, divide the selling price by 1.35: 180 ÷ 1.35 ≈ 133.33. So the product cost is about $133. Checking quickly: 133.33 × 1.35 ≈ 180. The other options give prices that are too high when multiplied by 1.35, confirming that the cost is approximately $133.

When a price is set using a markup on cost, the selling price equals the cost times (1 + the markup rate). Here the markup is 35%, so Selling price = Cost × 1.35. To find the cost, divide the selling price by 1.35: 180 ÷ 1.35 ≈ 133.33. So the product cost is about $133. Checking quickly: 133.33 × 1.35 ≈ 180. The other options give prices that are too high when multiplied by 1.35, confirming that the cost is approximately $133.

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