What markdown would be required to sell a poorly moving keystone item at cost?

What markdown would be required to sell a poorly moving keystone item at cost?

• A. 25%
• B. 50%
• C. 75%
• D. 100%

Answer: (B)

When a keystone price is used, the selling price is set at twice the cost. To sell at cost, you must reduce the keystone price by half. If the cost is C, the keystone price is 2C. To reach cost C, you markdown by C, which is 50% of the keystone price. So the required markdown is fifty percent. For example, with cost $10, the keystone price is $20. A 50% markdown brings it to $10, which is the cost. A smaller markdown leaves the price above cost, a larger markdown pushes it below cost, and a 100% markdown would drop the price to $0, not to cost.

When a keystone price is used, the selling price is set at twice the cost. To sell at cost, you must reduce the keystone price by half. If the cost is C, the keystone price is 2C. To reach cost C, you markdown by C, which is 50% of the keystone price. So the required markdown is fifty percent.

For example, with cost $10, the keystone price is $20. A 50% markdown brings it to $10, which is the cost. A smaller markdown leaves the price above cost, a larger markdown pushes it below cost, and a 100% markdown would drop the price to $0, not to cost.