Chapter 8.II, Problem 23RE

If Costco pays $37.50 for the vacuum cleaner shown here,

a. What is the percent markup based on selling price?

b. If Costco pays $1.50 to the insurance company for each product replacement policy sold, what is the percent markup based on selling price of the vacuum cleaner and policy combination?

c. If 6.000 vacuum cleaners are sold in a season and $40\%$ are sold with the insurance policy, how many additional "markup dollars." the gross margin, was made by offering the policy?

d. (Optional) As a housewares buyer for Costco, what is your opinion of such insurance policies, considering their effect on the “profit picture" of the department? How can you sell more policies?