KidCo has produced a new toy for young children. It costs KidCo $20 to produce and package each toy. KidCo sells the game to various retailers (e.g., toy stores and discount stores), and sets the wholesale price to achieve a 60% markup “on cost”. If these retailers, in turn, calculate their price (to consumer) based on a 50% markup “on the retail price” how much will a consumer pay for the toy?
Cost of Production = $20
Markup = 60%
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Question & Answer: KidCo has produced a new toy for young children. It costs KidCo $20 to produce and package…..
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Wholesale price = Cost of Production*(1+Markup) = 20*1.6=32 $
Markup of retailer = 50%
Customer has to pay = wholesale price*(1+Markup of retailer) = 32*1.5=48 $