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

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.