A question about profit margin

Question

A retail shop sells a product for $1.47 each.This price includes a sales tax of 20%.When sales tax is removed,the shop makes a profit margin of 14.5%.How much does the retailer pay per product?

Answer 1

 

Answer:  $1.07  

.. assuming the question is asking for the wholesale cost (to retailer) per product ..

.. determine the retail price (shelf price) before sales tax  : $1.47/1.20 = $1.23 ..

.. next find the wholesale cost per product using the 14.5% profit margin  = $1.23/1.145 = $1.07

.. $1.07 represents the wholesale cost per product (to retailer) ..

 

               

 

 

 

 

 

 

 

 

 

 

Answer 2

First you must find the price of the product before tax. To do this set 1.47=x+.2x: the x is the price of the product before the tax. When you calculate the price of a product after tax you always take the price x and then add the cost of the tax which is a percentage of the value of the product. In this case it is 20%, hence multiplying x by .2 in the equation above. Now solve for x: 1.47=1.2x, then x= 1.225. This is the price of the product before tax. Now the problem states that the shop makes a profit margin of 14.5%. This means that the shop pays in terms of percentages 1-.145=.855; meaning 85.5% of market price is the wholesale price for the retailer. Simply multiply: 1.225(.855)=1.047. If you round to whole cents then the retailer pays $1.05 per item.