Question

A department store paid ​$30.56 for a wine set. Overhead expense is 11% of the regular selling price and profit is 16% of the regular selling price. During a clearance​ sale, the set was sold at a markdown of 23%. What was the operating profit or loss on the​ sale? Round the final answer to the nearest cent as needed.

Answer 1

Let’s assume the regular selling price as S

Given information –

Purchase Cost of wine set (C) = $30.56

Overhead Expense (E) = 11% of regular selling price = 0.11S

Profit (P) = 16% of regular selling price = 0.16S

Now, Regular Selling Price -> S = C + E + P = 30.56 + 0.11S + 0.16S

On solving, we get S= $41.86

Now, markdown = 23%

Markdown Amount = 23% of (regular selling price) = 0.23 * 41.86 = $9.63

So, Discounted selling price = 41.86 – markdown amount = 41.86 – 9.63 = $32.23

Profit/ Loss = 32.23 – (C + E) = 32.23 – (30.56 + 0.11 * 41.86) = - 2.93

So, a loss of $2.93