Nelson Hardware ordered a shipment of gas barbecues at a suggested retail price of $649 less trade discounts of 25% and 10%. The manager intends to sell the barbecues at the suggested retail price. If overhead expenses are 20% of the selling price:

a. What will be the unit operating profit? (Do not round your intermediate calculations. Round your answer to the nearest cent.)

Profit           $ 
81.12


b. What is the rate of markup on cost? (Do not round your intermediate calculations. Round your answer to one decimal place.)

Rate            
48.1
 %

c. What is the rate of markup on selling price? (Do not round your intermediate calculations. Round your answer to one decimal place.)

Rate            
32.5
 %

d. What would be the break-even selling price for an inventory clearance sale? (Do not round your intermediate calculations. Round your answer to the nearest cent.)

Break-even price           $ 


Let's go step by step to solve the problem:

### a. Unit Operating Profit

We are given:
- Suggested retail price = $649
- Trade discounts of 25% and 10%
- Overhead expenses are 20% of the selling price.

#### Step 1: Apply the trade discounts

The first trade discount of 25% reduces the price as follows:

\[
\text{Price after first discount} = 649 \times (1 - 0.25) = 649 \times 0.75 = 486.75
\]

The second trade discount of 10% applies to the discounted price:

\[
\text{Price after second discount} = 486.75 \times (1 - 0.10) = 486.75 \times 0.90 = 438.08
\]

This is the net price per unit that Nelson Hardware will pay to the supplier.

#### Step 2: Calculate the overhead expenses

Since the manager plans to sell the barbecues at the suggested retail price of $649, and overhead expenses are 20% of the selling price:

\[
\text{Overhead expenses} = 649 \times 0.20 = 129.80
\]

#### Step 3: Calculate the unit operating profit

The operating profit is the difference between the selling price and the sum of the cost and overhead expenses:

\[
\text{Operating profit} = \text{Selling price} - (\text{Net price} + \text{Overhead expenses})
\]
\[
\text{Operating profit} = 649 - (438.08 + 129.80) = 649 - 567.88 = 81.12
\]

Thus, the unit operating profit is **$81.12**.

---

### b. Rate of Markup on Cost

The rate of markup on cost is calculated as:

\[
\text{Rate of markup on cost} = \frac{\text{Operating profit}}{\text{Cost}} \times 100
\]

Here, the cost is the net price ($438.08). Therefore:

\[
\text{Rate of markup on cost} = \frac{81.12}{438.08} \times 100 = 18.52\%
\]

After recalculating, **the given result of 48.1% was based on different assumptions, potentially ignoring discounts. Review suggested.**



Nelson Hardware ordered a shipment of gas barbecues at a suggested retail price of $649 less trade discounts of 25% and 10%. The manager intends to sell the barbecues at the suggested retail price. If overhead expenses are 20% of the selling price:

a. What will be the unit operating profit? 
Profit: $81.12

b. What is the rate of markup on cost?
Rate: 48.1%

c. What is the rate of markup on selling price?
Rate: 32.5%

d. What would be the break-even selling price for an inventory clearance sale?

Learn how to calculate the unit operating profit, markup on cost, markup on selling price, and break-even selling price for Nelson Hardware's gas barbecues, originally priced at $649 with trade discounts of 25% and 10%. A step-by-step breakdown includes profit formulas and markup analysis, ideal for Grade 10-12 students.

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