Answered

If the unit selling price is $2.50 and the unit cost is $1.00, what action is need to maintain the gross margin percentage when unit cost increases $0.25?*

Verified Answer :

MrGumby

In order to keep a constant gross margin percentage, you would need to raise the price of the product to $3.13.

In order to find this you must first calculate out the current gross margin percentage. You can find this using the equation below. 

\(\frac{Cost}{Price}\) = Gross Margin

\(\frac{1.00}{2.50}\) = Gross Margin

40% = Gross Margin

Now we need to use the same equation with a new cost to find price. 

\(\frac{Cost}{Price}\) = Gross Margin

\(\frac{1.25}{Price}\) = 40%

1.25/.40 = Price

3.13 = Price

calculista

Let

G--------> the gross margin percentage

P-------> unit selling price

C------> the unit cost

we know that

The gross margin percentage is equal to

\(G=\frac{C}{P} *100\)

in this problem

P=$@@MATH_TOKEN_1@@

C=$\(1.00\)

so

\(G=\frac{1.00}{2.50} *100\)

\(G=40\)%

If the unit cost increases $@@MATH_TOKEN_5@@

the new unit cost is equal to

@@MATH_TOKEN_6@@

Find the new value of the unit selling price for

C=$\(1.25\)

G=\(40\)%

\(G=\frac{C}{P} *100\\ \\ P=\frac{C}{G} *100\\ \\ P=\frac{1.25}{40} *100\\ \\ P=3.125\)

therefore

the answer is

Increases the unit selling price to $\(3.125\)

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