Marketing Problem

[Drummerboy]

I had this question on 4tests.com. Can anyone explain it? Thanks!

Wal-Mart's buying office just purchased leather belts for $30.00 each. They want a 20% markup at retail on the belts. What retail price should they charge?

Answer = $37.50

[ShotoJuku]

[SIZE="2"]I don't know what the choices were, but I would have said $36.00; was that a choice? :confused: [/SIZE]

[Drummerboy]

That was not a choice, but I thought $36 sounded right, too. I wonder if they got it wrong. $36.50 was a choice, but that doesn't make sense!

[DixieGirl]

I've worked it three times and looked over every example in my consumer math book and got $36! They must have gotten the answer wrong.:eek:

[yumeji]

I could almost guarantee that its 36$. I say almost, cause i always have doubts that they could actually get it wrong, although i know it happens. ^^

[Drummerboy]

Here is the explanation they gave. Can anyone make heads or tails of it?

Explanation of Answer:
To calculate the Retail Sales Price, you must divide $30.00(Cost) by 100% - 20%(Markup) returning $37.50.

Thanks!

[Blue]

hopefully i can explain this well...think of it this way:

if wal-mart was to have a 20%-off sale on the belts, what price would they have to set on the belts so that they don't lose money (in this case, wal-mart won't sell the belts for less than $30 since they bought it at that price). try to calculate it backwards. so if you make an algebraic equation, it would be:

(assume "x" is the price you need to charge)
x - 0.20x = 30
if you calculate it, it would turn out to be...
0.80x = 30
x = 37.50

is that clear? if not, i'll try re-explaining it.

good luck! =]

[Drummerboy]

I think I get it. They want it to have a markup that is 20% of the retail price instead of 20% of cost. We don't know the retail so we have to figure it backwards. We have to deduct 20% from retail: x(retail price) - .20x = 30.00. In other words, "the retail price minus 20% = $30". Okay, that makes sense.

An easier way to figure it out on multiple choice would be to take 20% away from the answer choices and see which one becomes $30.

Thanks Blue!