If the unit selling price is $2.50 and the unit cost is one dollar what action is need to maintain the gross margin percentage when the unit cost increases $.25

Question

Mathematics

Anne Hanna

6 May, 07:44

If the unit selling price is $2.50 and the unit cost is one dollar what action is need to maintain the gross margin percentage when the unit cost increases $.25

+2

Answers (1)

Know the Answer?

Fisher Bernard · Answer 1

If the unit selling price is $2.50 and the cost of the same unit to seller is $1.00 that means the profit on each unit is $1.50

If the unit cost increases by $0.25 then the profit made goes down to $1.25 instead of $1.50

In order to maintain the percentage you would have to increase the selling price

GMP is selling price less the cost of goods sold so the original GMP would be 2.50 minus 1.00 to get a GMP of 1.50

GMP of the new price would be 2.50 minus 1.75 to make a new GMP of 0.75

If you increase the selling price to 2.75 to cover the marginal change you end up with 2.75 minus 1.25 to get a GMP of 1.50

Answer: increase your selling price by 0.25 also