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A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE?
Most Upvoted Answer
A company wishes to earn a 20% profit margin on selling price, what is...
This can be explained as below:
Let us assume the Selling Price of a Unit - Rs.100
Profit on Selling Price is 20% i.e. Rs.20
Therefore cost per unit will be :
Selling Price -Profit= Cost
Rs.100-Rs.20=Rs.80
Hence cost per Unit is Rs.80
Profit Per Unit is Rs.20
Therefore Profit Per unit on Cost will be =20/80*100
=25% on Cost
Let us assume the Selling Price of a Unit - Rs.100
Profit on Selling Price is 20% i.e. Rs.20
Therefore cost per unit will be :
Selling Price -Profit= Cost
Rs.100-Rs.20=Rs.80
Hence cost per Unit is Rs.80
Profit Per Unit is Rs.20
Therefore Profit Per unit on Cost will be =20/80*100
=25% on Cost
Community Answer
A company wishes to earn a 20% profit margin on selling price, what is...
Understanding Profit Margin and Markup
To achieve a 20% profit margin on selling price, it’s essential to understand how profit margin and markup relate to one another.
Definitions
- Profit Margin: This is the percentage of the selling price that represents profit. A 20% profit margin means that 20% of the selling price is profit.
- Markup: This is the percentage added to the cost price to determine the selling price.
Calculating the Profit Margin
Let’s denote:
- Selling Price (SP) = 100 (for easier calculations)
- Profit Margin = 20% of SP = 20
From this, we can determine the cost price (CP):
- Profit = Selling Price - Cost Price
- 20 = 100 - CP
- Therefore, CP = 100 - 20 = 80
Calculating Markup on Cost
To find the markup percentage based on the cost price:
- Markup = (Selling Price - Cost Price) / Cost Price
- Markup = (100 - 80) / 80
- Markup = 20 / 80 = 0.25 or 25%
Conclusion
Thus, to achieve a 20% profit margin on selling price, the profit markup on cost must be:
- Answer: B) 25%
This calculation highlights how different pricing strategies impact profit margins and markups, ensuring that businesses can set prices effectively to meet their financial goals.
To achieve a 20% profit margin on selling price, it’s essential to understand how profit margin and markup relate to one another.
Definitions
- Profit Margin: This is the percentage of the selling price that represents profit. A 20% profit margin means that 20% of the selling price is profit.
- Markup: This is the percentage added to the cost price to determine the selling price.
Calculating the Profit Margin
Let’s denote:
- Selling Price (SP) = 100 (for easier calculations)
- Profit Margin = 20% of SP = 20
From this, we can determine the cost price (CP):
- Profit = Selling Price - Cost Price
- 20 = 100 - CP
- Therefore, CP = 100 - 20 = 80
Calculating Markup on Cost
To find the markup percentage based on the cost price:
- Markup = (Selling Price - Cost Price) / Cost Price
- Markup = (100 - 80) / 80
- Markup = 20 / 80 = 0.25 or 25%
Conclusion
Thus, to achieve a 20% profit margin on selling price, the profit markup on cost must be:
- Answer: B) 25%
This calculation highlights how different pricing strategies impact profit margins and markups, ensuring that businesses can set prices effectively to meet their financial goals.
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A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE?
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A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE?.
A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company wishes to earn a 20% profit margin on selling price, what is the profit mark up on cost, which will achieve the required profit margin? A) 33% B) 25% C) 20% D) NONE?.
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