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CA Foundation · Accounting · Accounts from Incomplete Records

A trader sells goods at a mark-up of 25% on cost. What is the gross profit as a percentage of sales?

The gross profit is 20% of sales. With a 25% mark-up on cost, cost of 100 gives sales of 125 and profit of 25, and 25 divided by 125 equals 20%. The 25% figure wrongly uses cost as the base.

  1. A25%
  2. B20%Correct
  3. C33.33%
  4. D30%

Explanation

Let cost = 100. Mark-up 25% gives profit 25 and sales 125. Gross profit on sales = 25/125 = 20%. The figure 25% is wrong because it applies profit to cost, not to sales.

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