Question

Gross Profit Method) Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 3. 331 /3%. 2. 25%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.

Short answer

Gross profit on sales are as follows:

(1) 16.67%

(2) 20%

(3) 25%

(4) 33.33%

Step-by-step solution

Calculation of gross profit on sales

(1) Gross profit on sales is calculated as follows:

$\begin{array}{rcl}\mathrm{Gross}\mathrm{profit}\mathrm{on}\mathrm{selling}\mathrm{price}& =& \frac{\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}{100\%+\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}\\ & =& \frac{20\%}{100\%+20\%}\\ & =& 16.67\%\\ & & \end{array}$

Calculation of gross profit on sales

(1) Gross profit on sales is calculated as follows:

$\begin{array}{rcl}\mathrm{Gross}\mathrm{profit}\mathrm{on}\mathrm{selling}\mathrm{price}& =& \frac{\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}{100\%+\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}\\ & =& \frac{25\%}{100\%+25\%}\\ & =& 20\%\end{array}$

Calculation of gross profit on sales

(1) Gross profit on sales is calculated as follows:

$\begin{array}{rcl}\mathrm{Gross}\mathrm{profit}\mathrm{on}\mathrm{selling}\mathrm{price}& =& \frac{\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}{100\%+\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}\\ & =& \frac{33{\displaystyle \frac{1}{3}}\%}{100\%+33{\displaystyle \frac{1}{3}}\%}\\ & =& 25\%\end{array}$

Calculation of gross profit on sales

(1) Gross profit on sales is calculated as follows:

$\begin{array}{rcl}\mathrm{Gross}\mathrm{profit}\mathrm{on}\mathrm{selling}\mathrm{price}& =& \frac{\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}{100\%+\mathrm{Percentage}\mathrm{markup}\mathrm{on}\mathrm{cost}}\\ & =& \frac{50\%}{100\%+50\%}\\ & =& 33.33\%\end{array}$

Thus, gross profit for case 1, 2, 3, and 4 equals 16.67%, 20%, 25% and 33.33% respectively.