Next Designs Sets Its Regular Prices Based on Overhead Expenses

question 114

Short Answer

Next Designs sets its regular prices based on overhead expenses at 50% of cost and an operating profit of 40% of cost. What will be the operating profit (as a percent of cost) for clothing sold at a 20% discount?

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Definitions:

Minimum Wage

Minimum wage is the lowest legal remuneration that employers are allowed to pay their workers, established by government laws.

Quantity Demanded

The total amount of a good or service that consumers are willing to buy at a given price level in a given period.

Labor

The human effort, both physical and mental, used to produce goods and services.

Equilibrium Wage

The wage rate at which the quantity of labor employers are willing to hire equals the quantity workers are willing to supply, with no excess demand or supply.