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

What is the retailing equation used to determine selling price?

1. Selling price = cost + markup

2. Cost = selling price / markup

3. Selling price = cost - markup

4. Cost = selling price x markup

The correct answer is: Selling price = cost + markup

The retailing equation that determines selling price is defined as selling price equals cost plus markup. This equation illustrates the fundamental relationship in pricing strategies where the selling price reflects the total amount received by the retailer after accounting for the cost of the product and the additional markup added to achieve profit. When using this equation, businesses can ensure they cover their expenses associated with acquiring or producing a product (the cost) and generate profit through the markup, which is the amount added to the cost price to set the retail price. This method is essential for pricing goods appropriately, ensuring profitability while remaining competitive in the market. In contrast, other options do not correctly reflect the standard approach used to calculate selling price in retail scenarios, as they either propose incorrect operations or relationships between cost, selling price, and markup. Understanding this equation is crucial for anyone involved in retail or pricing strategy, enabling effective pricing decisions based on costs and desired profit margins.