Mathematics
Proulx895
2021-02-23 14:34:30
If the unit selling price is $2.50 and the unit cost is $1.00, what action is needed to maintain the gross margin percentage when unit cost increases $0.25?
ANSWERS
MorelandRichard
2021-02-23 16:49:23

Get the gross margin percentage of cost and multiply it to the new unit cost to get maintain the same gross margin percentage of cost. Units Selling Price :  2.50     Unit Cost                - 1.00 Profit Margin          :  1.50 Gross profit margin % on sales: 1.50 / 2.50 = 0.60 x 100% = 60% Gross profit margin % on cost : 1.50 / 1.00 = 1.50 x 100% = 150% If the cost increase by $0.25  Unit cost : 1.00 + 0.25 = 1.25 1.25 * 150% = 1.875 gross margin. Gross margin + Unit Cost = Unit Price 1.875             + 1.25        = 3.125 Gross margin % on sales : 1.875 / 3.125 = 0.60 x 100% = 60% Gross margin % on cost   : 1.875 / 1.25   = 1.50 x 100% = 150%

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