Multiple choice

A manufacturer sells a product to a wholeseller at 10% profit. Then the wholeseller sells it to the dealer and the dealer to the retailer at the margin of 25% each. The retailer marks up the price by 20% and then offers a 15% discount to the customer. Had the customer bought it from the manufacturer directly (the manufacture would still keep his 10% profit), what would have been approximate percentage reduction in price at which he bought the product from manufacturer compare to the price at which he bought the product from the retailer?

  1. 21.56%

  2. 33.45%

  3. 25.72%

  4. 37.25%

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Let the cost price for the manufacturer be 100. Following the chain of transactions, the selling price to the customer from the retailer is 100 * 1.10 * 1.25 * 1.25 * 1.20 * 0.85 = 175.3125. If bought directly from the manufacturer, the price would be 110. The percentage reduction is ((175.3125 - 110) / 175.3125) * 100 = 37.25%.

AI explanation

Assuming the manufacturer's cost is 100, the customer buying directly pays 110. If buying through the supply chain, the retailer's cost is 100 * 1.10 * 1.25 * 1.25, which equals 171.875. The retailer marks this up by 20% and offers a 15% discount, making the final customer price 171.875 * 1.20 * 0.85, which is 175.3125. The percentage reduction is ((175.3125 - 110) / 175.3125) * 100, equaling approximately 37.25%.

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