Pake Productions wants to mark down a new line of stereo speakers that they have in the stores. After the speakers are marked down, Pake Productions wants to calculate the markdown percentage. If the original price of the speakers was $200, and the new price of the speakers is $160, what is the markdown percent?
A. $40
B. $50
C. 25%
D. 20%
E. Both (C) and (D) are correct.
Answer: (E) is the correct answer. If Pake Productions utilizes the new price for the speakers, $160, then their markdown would be 25%. If they utilize the original price as the denominator, then the markdown percentage is 20%. (A) and (B) are both incorrect as they are dollar amounts, not percentages. While 25% (C) is a good answer for calculating the mark-down percentage on the new selling price (Amount of Markdown/New Sales Price, or $40/$ 160), it is not the most correct. Likewise with (D); if Pake calculated the markdown on the original price ($40/$200), this would be the correct answer, although it is not the correct answer for the question. The markdown calculation depends on the accounting system being used. Both markdown methods are common.