CSLB Law & Business ExamBusiness FinancesEasy
A contractor buys materials for $100 and sells them to the customer for $150. What is the markup percentage based on cost?
- A50%
- B33%
- C60%
- D150%
Show answer & explanationAnswer & explanation
Correct answer: A. 50%
Markup is calculated as (Selling Price − Cost) ÷ Cost = ($150 − $100) ÷ $100 = 50%. Markup is always based on cost, while margin is based on selling price.
Why the other options are wrong
- B. This would be the gross margin percentage, not markup.
- C. Incorrect calculation, does not match either markup or margin formula.
- D. This confuses selling price with markup percentage.
Markup
The percentage added to cost to determine selling price, calculated as (Price − Cost) ÷ Cost.
- Markup is based on cost
- Margin is based on selling price
- Same dollar profit produces different markup and margin percentages
Memory trick: Markup grows from Cost; Margin comes from Sale price.