CA Foundation · Accounting · Accounts from Incomplete Records
If the gross profit margin on sales is 40%, what is the mark-up on cost?
The mark-up on cost is 66.67%. With sales of 100 and a 40% margin, profit is 40 and cost is 60. Dividing profit by cost, 40/60, gives 66.67%. Using 40% repeats the margin instead of converting the base.
- A40%
- B60%
- C66.67%Correct
- D50%
Explanation
Let sales = 100. Gross profit = 40, so cost = 60. Mark-up on cost = 40/60 = 66.67%. The 60% option wrongly uses cost as a percentage of sales.
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