Every Week A Grocery Store Buys 30 Gallons Of Milk At Cost Of 1.58 Per Gallon. The Owner Anticipates A 15% Spoilage Rate. To Achieve A 20% Mark Up Based On Cost What Should Be The Selling Price Per Gallon?


4 Answers

Oddman Profile
Oddman answered
The total revenue desired is
  revenue = (cost) + 20%*(cost) = 1.20*(cost) = 1.20*($1.58/gal)*(30 gal) = $56.88
The amount of milk available for sale is
  (gallons for sale) = (original amount of milk) - 15%*(original amount of milk)
  = 0.85*(30 gal) = 25.5 gal

The selling price per gallon must be
  selling price = $56.88/(25.5 gal) ≈ $2.23/gal
The formula ends up being
  selling price/gal = (cost/gal)*(1+markup on cost)/(1 - spoilage rate)
  = $1.58*1.20/0.85
muneer ahmed Profile
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xiao guguai Profile
xiao guguai answered
The Selling Price Per Gallon is 1.896.

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