Future Business Leaders of America (FBLA) Business Calculations Practice Test

A manufacturer makes iPhones at a cost of $250 and sells them for $400. What is the percent of markup based on cost?

1. 40%

2. 16.7%

3. 60%

4. 150%

The correct answer is: 60%

To calculate the percent of markup based on cost, you need to understand how markup is determined. The percent of markup is calculated using the formula: \[ \text{Percent of Markup} = \left( \frac{\text{Selling Price} - \text{Cost}}{\text{Cost}} \right) \times 100 \] In this scenario, the cost of the iPhone is $250 and the selling price is $400. First, you subtract the cost from the selling price: \[ \text{Selling Price} - \text{Cost} = 400 - 250 = 150 \] Next, you divide this markup amount ($150) by the cost ($250): \[ \frac{150}{250} = 0.6 \] Finally, to convert this decimal into a percentage, you multiply by 100: \[ 0.6 \times 100 = 60\% \] This means the correct answer is that the percent of markup based on cost is 60%. This calculation accurately reflects the increase from the cost price to the selling price relative to the initial cost, which is critical for understandings like pricing strategy and profitability in a business context.