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Difficulty: MediumPercentage Change, Markups, and Discounts

An IT consultant bills a corporate client for a bulk order of software licenses. The wholesale cost of the licenses is $850.00\$850.00. The consultant applies a 40%40\% markup to the wholesale cost to determine the retail price. After a contract negotiation, the consultant offers the client a 15%15\% discount off the retail price. What is the final price the client pays for the software licenses?

  1. A
    $1,062.50\$1,062.50
  2. B
    $1,172.15\$1,172.15
  3. $1,011.50\$1,011.50Answer
  4. D
    $1,175.00\$1,175.00

Answer

$1,011.50\$1,011.50
First, find the retail price by adding a 40%40\% markup to the $850.00\$850.00 wholesale cost. 40%40\% of $850.00\$850.00 is $340.00\$340.00, making the retail price $1,190.00\$1,190.00. Next, calculate the 15%15\% discount on the new retail price. 15%15\% of $1,190.00\$1,190.00 is $178.50\$178.50. Subtracting this discount from the retail price gives a final price of $1,011.50\$1,011.50.

Step-by-Step Solution

1
Calculate the markup amount.
$340.00\$340.00
The markup is 40%40\% of the wholesale cost of $850.00\$850.00 (0.40×8500.40 \times 850).
2
Calculate the retail price.
$1,190.00\$1,190.00
Add the markup amount to the wholesale cost (850.00+340.00850.00 + 340.00).
3
Calculate the discount amount.
$178.50\$178.50
The discount is 15%15\% of the new retail price, not the wholesale cost (0.15×11900.15 \times 1190).
4
Calculate the final price.
$1,011.50\$1,011.50
Subtract the discount amount from the retail price (1,190.00−178.501,190.00 - 178.50).

Key Concept

Calculating successive percentage changes requires applying the second percentage to the new intermediate value (the retail price), not the original value.
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Topics

Percentage Change, Markups, and Discounts

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