A discount of 20% was applied to a $15 event cap due to a logo placement error. If the cost of each cap is $8, what is the actual markup percentage?

A discount of 20% was applied to a $15 event cap due to a logo placement error. If the cost of each cap is $8, what is the actual markup percentage?

• A. 33 1/3%
• B. 25%
• C. 60%
• D. 50%

Answer: (D)

Markup is based on cost, so we compare profit to the production cost. A 20% discount on the $15 price reduces it to $12. The cost to produce each cap is $8. The markup is (selling price − cost) ÷ cost = (12 − 8) ÷ 8 = 4 ÷ 8 = 0.5, which is 50%. So the actual markup percentage is 50%. (For contrast, profit margin would be 4 ÷ 12 = 33.3%.)

Markup is based on cost, so we compare profit to the production cost. A 20% discount on the $15 price reduces it to $12. The cost to produce each cap is $8. The markup is (selling price − cost) ÷ cost = (12 − 8) ÷ 8 = 4 ÷ 8 = 0.5, which is 50%. So the actual markup percentage is 50%. (For contrast, profit margin would be 4 ÷ 12 = 33.3%.)