A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a margin

Question

A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a margin of 30% based on selling price. If the manufacturer sells directly to a retailer who then adds a set margin of 40% based on selling price, determine the retail price charged to consumers.

Please note: I figured this one way and my partner another -- both are below which is right and why?

40 * 1.3 * 1.4 = 254.8

Manufacturer sells to retailer for
140 * 1.3 = 182

Retailer sells it to consumer for
182 * 1.4 = 254.8

$254.80
OR

Marufacturer's price = cost = $140 = $200 (1-markup) (1-.3) Retailer's price = cost = $200 = $333.33 (1-markup) (1-.4)

Explanation / Answer

The manufacturer is selling the goods to Retailer and therefore retailer is the customer.

The manufacturer makes a margin of 30% on its selling price to retailer

Since,

Selling price - Margin = Manufacturing cost

Or, Selling price – 0.3x Selling price = Manufacturing cost

Or, 0.7 x Selling Price = Manufacturing cost = $140

Or, Selling price = $140/0.7 = $200

The selling price of manufacturer is the purchase cost of retailer . The retailer makes a margin of 40% on its selling price to retail customer.

Since,

Selling price to retailer – Margin = Purchase cost of retailer

Or, Selling price to retailer – 0.4 x Selling price to retailer = Purchase cost of retailer

Or, 0.6 x Selling price to retailer = Purchase cost of retailer = $200

Or, Selling price to retailer = $200/0.6 = $333.33

NOTE: IT IS IMPORTANT TO NOTE THAT APPLICABLE MARGIN IS ON “SELLING PRICE” AND NOT ON “COST “ OF THE PRODUCT AND THAT’S WHY ABOVE METHODOLGY HAS BEN ADOPTED AND YOUR PARTNER HAS ADOPTED THE RIGHT METHOD OFCALCULATION

RETAIL PRICE CHARGED TO CUSTOMER = $333.33

RETAIL PRICE CHARGED TO CUSTOMER = $333.33

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