If a plant is priced at $2.40 and the business targets a 25% profit, what is the wholesale cost?

If a plant is priced at $2.40 and the business targets a 25% profit, what is the wholesale cost?

• A. $1.80
• B. $1.92
• C. $2.00
• D. $2.10

Answer: (B)

When you price with a markup on cost, the selling price equals the wholesale cost plus 25% of that cost. That makes the selling price 1.25 times the wholesale cost. Set 2.40 = 1.25 × wholesale_cost and solve: wholesale_cost = 2.40 / 1.25 = 1.92. So the wholesale cost is $1.92. Check quickly: 1.92 × 0.25 = 0.48, and 1.92 + 0.48 = 2.40. If the wholesale cost were 1.80, the price would be 2.25; if 2.00, it would be 2.50; if 2.10, it would be 2.625. Only 1.92 yields the 2.40 selling price.

When you price with a markup on cost, the selling price equals the wholesale cost plus 25% of that cost. That makes the selling price 1.25 times the wholesale cost. Set 2.40 = 1.25 × wholesale_cost and solve: wholesale_cost = 2.40 / 1.25 = 1.92. So the wholesale cost is $1.92.

Check quickly: 1.92 × 0.25 = 0.48, and 1.92 + 0.48 = 2.40. If the wholesale cost were 1.80, the price would be 2.25; if 2.00, it would be 2.50; if 2.10, it would be 2.625. Only 1.92 yields the 2.40 selling price.