Margo purchases bulk teas from a warehouse and marks up those prices by 40% for retail sale. When teas go unsold for more than two months, Margo marks down the retail price by 40%. She says that she is breaking Even that is, she is getting the same price for the tea that she paid for it. Is she correct? Complete the explanation.

Margo is incorrect. She is selling tea in loss.

Step-by-step explanation:

Let the cost price of teas when purchased from the warehouse = $ x

Then Margo marks retail price of teas a = x + 0.40 x

a = x (1 + 0.40)

a = 1.4 x

After 2 months she marks down the retail price by 40% then retail price becomes b = 1.4 x - 40% of 1.4 x

b = 1.4 x - 0.4 x 1.4 x

b = 1.4 x - 0.56 x

b = 0.84 x

Difference between cost price and selling price b is = x -.84 x

= 0.16 x

which shows now Margo is selling under the cost price so Margo is incorrect.