Question

Rhine Company sets price equal to cost plus 40%. Recently, Rhine charged a customer a price of $280 for an item.

What was the cost of the item to Rhine?
a. $580
b. $340
c. $200
d. $185
e. $120

Answer 1

Answer:

Option (C) is correct.

Explanation:

Given that,

Price of an item charged by the Rhine company = $280

Rhine company sets price = Cost + 40% of cost

Let the cost of an item to Rhine be x,

Hence,

Price = x + 40%(x)

$280 = x + 0.4x

$280 = 1.4x

x = $280 ÷ 1.4

  = $200

Profit for Rhine = Price - cost

                         = $280 - $200

                         = $80

Therefore, the cost of the item to Rhine is $200.