Question 7 TGP Inc uses a markup of 35% of Cost on all merchandise it sells. Overhead expenses are 8% of Sales. a) What is the selling price of inventory that has a unit cost of $15? I b) How much profit is TGP Inc making on this inventory?
a) To calculate the selling price, we need to add the markup percentage to the unit cost.
Markup = 35% of Cost = 0.35 * $15 = $5.25
Selling Price = Unit Cost + Markup = $15 + $5.25 = $20.25
b) To calculate the profit, we need to subtract the unit cost and overhead expenses from the selling price.
Unit Cost = $15
Overhead Expenses = 8% of Sales = 0.08 * $20.25 = $1.62
Profit = Selling Price - Unit Cost - Overhead Expenses
= $20.25 - $15 - $1.62
= $3.63
TGP Inc is making a profit of $3.63 on this inventory.
To calculate the selling price and profit, we can use the following steps:
a) Selling Price calculation is done by adding the markup to the cost:
Selling Price = Cost + Markup
Markup = 35% of Cost
Cost = $15
Markup = 35% * Cost = 0.35 * $15 = $5.25
Selling Price = $15 + $5.25 = $20.25
Therefore, the selling price of the inventory with a unit cost of $15 is $20.25.
b) To calculate the profit, we need to subtract both the cost and overhead expenses from the selling price:
Profit = Selling Price - Cost - Overhead Expenses
Overhead Expenses = 8% of Selling Price
Overhead Expenses = 8% * Selling Price = 0.08 * $20.25 = $1.62
Cost = $15 (Given)
Selling Price = $20.25
Profit = $20.25 - $15 - $1.62 = $3.63
Therefore, TGP Inc is making a profit of $3.63 on this inventory.