CA Foundation · Business Economics · Price Determination in Different Markets
A firm's unit cost of production is ₹240 and it follows a full-cost pricing rule with a mark-up of 25% on cost. If the firm instead wanted the same price using a mark-up on the selling price, what percentage of the selling price is the margin?
The margin is 20% of the selling price. With a 25% mark-up on a cost of ₹240, the price is ₹300, so the margin is ₹60. Dividing ₹60 by the selling price of ₹300 gives 20%, whereas 25% is the margin on cost.
- A25%
- B20%Correct
- C30%
- D16.67%
Explanation
Price = 240 × 1.25 = ₹300. Margin = 300 − 240 = ₹60. Margin as a share of price = 60/300 = 20%. The 25% option wrongly uses cost as the base instead of selling price.
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