sana kareem (student) (43 Points)
22 May 2013
A company wishes to earn a 20% profit margin on selling price. _________ is the proit mark up on cost , which will achieve the required proit margin
plz help me solve this question along with explanation
M.Sriram Shenoy
(CA Final)
(814 Points)
Replied 04 June 2013
25% on cost will get you the same profit. Explanation is as follows.
When profit % is expressed on an item, then such item is assumed to be 100% (i-e If profit is expressed as 15% on cost, then, cost is assumed as 100 (any currency unit) . If profit is expressed as 5% on Selling price, then, Selling price is 100 (any currency unit).
In the present case, 20% profit is on Selling price. Hence, by applying the above logic, Selling price is INR 100. Profit would then be INR 20.00 (20% on INR 100).
So, to earn the same INR 20 profit, the profit percentage on cost is calculated as below ;
Cost = 80
Profit = 20
Hence, profit % on cost is 20/80 = 0.25 or 25%.
Hope this helps.
veeru sagar
(BBE,M.com,CA Final )
(468 Points)
Replied 05 June 2013
if your company wishes to earn a 20% profit margin on selling price. 25% is the profit mark up on cost , which will achieve the required proit margin ...............
bcoz 1/4 of cost is equal to 1/5 on sale price
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