Question

Costco can purchase a bag of Starbucks coffee for $20.00 less discounts of 20%, 15%, and...

Costco can purchase a bag of Starbucks coffee for $20.00 less discounts of 20%, 15%, and 7%. It then adds a 40% markup on cost. Expenses are known to be 25% of the regular unit selling price.

a. What is the cost of the coffee?

b. What is the regular unit selling price?

c. How much profit will Costco make on a bag of Starbucks coffee?

d. What markup on selling price percentage does this represent?

e. Repeat questions (a) through (d) if the list price changes from $20.00 to $24.00.

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Homework Answers

Answer #1

a.Cost of coffee=$20*(1-20%)*(1-15%)*(1-7%)

Cost of coffee=$12.65

b.Selling price per Coffee=Cost+Mark-up on cost

Selling price per Coffee=$12.65+($12.65*40%)

Selling price per Coffee=$12.65+$5.06

Selling price per coffee=$17.71

c.Profit=Selling price per unit-Cost of coffee-Expenses

Profit=$17.71-$12.65-($17.71*25%)

Profit=0.63

d.Markup on selling price percentage=($17.71-$12.65)/$17.71

Markup on selling price percentage=28.571%
e.If list price is $24

Cost of coffee=$24*(1-20%)*(1-15%)*(1-7%)

Cost of coffee=$15.18

Selling price per Coffee=Cost+Mark-up on cost

Selling price per Coffee=$15.18*($15.18*40%)

Selling price per Coffee=$15.18+$6.072

Selling price per coffee=$21.252

Profit=Selling price per unit-Cost of coffee-Expenses

Profit=$21.252-$15.18-($21.252*25%)

Profit=0.759

d.Markup on selling price percentage=($21.252-$15.18)/$21.252

Markup on selling price percentage=28.571%

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