I have what should be an easy one.
If it costs me $100.00 to manufacture an item and I want to sell it at a 25% mark up, why do I get different answers when I perform the operation the following ways?
1. $100.00 x 25% = $25.00
2. $100.00 / .75 = $133.334
Should these two not be equal? I would like this explained to me please.
Thank youHi Vivian,
The fact that these two prices are not equal shows that the phrase "a 25% mark up" is ambiguous. More precisely, it does not say 25% of WHAT. So it can be interpreted as
When percentages are involved you it is important to understand what the percentages refer to. For example in your situation suppose you add 25% of the manufacturing cost to your $100.00 item to get a selling price of $125.00. Then you decide to have a "25% reduction sale". I would understand the reduction to be 25% of the selling price of $125.00. But $125.00 x 25% = $31.25 and you would receive $125.00 - $31.25 = $93.75. Hence a 25% markup followed by a 25% reduction results in you losing money.Penny and Claude