Question

On April 24, 2015, Apple entered the wearable technology market with the release of its Apple Watch. A May 1, 2015, article published in The Wall Street Journal estimated that the cost of materials and labor required to produce the watch totaled $79.90. The Apple Watch’s retail price is $389.

Estimates for the iPad mini 2 place materials and labor cost at 41% of the retail price. If Apple had wanted to maintain that same relationship between materials and labor cost and retail price for the Apple Watch, what price would Apple have set for the watch? What markup percentage of the cost would have yielded this price? (Round answers to 0 decimal places, e.g. 25.)

PRICE :

MARK UP PERCENTAGE :

Answer 1

Solution:

Material & labor cost of watch = $79.90

Cost of Ipad mini 2 = 41% of retail price

Let retail price of ipad mini = $100

Cost of Ipad mini = 100*41% = $41

Profit in ipad mini = $100 - $41 = $59

Mark up on cost = $59/$41 = 143.90%

If apple to keep same relationship between material and labor cost and retail price for watches also then mark up on watches = $79.90*143.90% = $114.98

Retail price to be fixed for watch = $79.90 + $114.98 = $194.88 = $195 (Rounded off)

Mark up percentage of cost = 143.90%