The Deluxe Register Company sells 1,000 register books annually at a price of $35 each. If the pricing policy adheres to a 40% markup of selling price, the cost of each register book 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

The Deluxe Register Company sells 1,000 register books annually at a price of $35 each. If the pricing policy adheres to a 40% markup of selling price, the cost of each register book is approximately what?

Explanation:
When markup is based on the selling price, the cost is the portion of the selling price that remains after subtracting the markup. The markup amount equals 0.40 × 35 = 14, so the cost is 35 − 14 = 21. Equivalently, cost = 35 × 0.60 = 21. Therefore, the cost per book is about $21. (If you misinterpret the basis of the markup, you’d get a different number, but this problem clearly uses markup on selling price.)

When markup is based on the selling price, the cost is the portion of the selling price that remains after subtracting the markup. The markup amount equals 0.40 × 35 = 14, so the cost is 35 − 14 = 21. Equivalently, cost = 35 × 0.60 = 21. Therefore, the cost per book is about $21. (If you misinterpret the basis of the markup, you’d get a different number, but this problem clearly uses markup on selling price.)

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