ACCA Applied Knowledge · Financial Accounting · Incomplete records
A business has sales of $360,000 and a gross profit margin of 35%. Which of the following is the mark-up on cost, to the nearest whole percent?
The mark-up is 54%. With sales of 100 and a margin of 35%, gross profit is 35 and cost is 65. Dividing profit by cost gives 35/65, or about 53.8%, which rounds to 54%.
- A35%
- B54%Correct
- C65%
- D46%
Explanation
Take sales as 100: gross profit 35, cost 65. Mark-up = 35/65 = 53.8%, which is 54%. Choosing 35% repeats the margin, and 65% is the cost ratio, not the mark-up.
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