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A company wishes to earn a 20% profit margin on selling price _______ is the profit marks up on cost, which will achieve the required profit margin ?
- a)33%
- b)25%
- c)20%
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
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A company wishes to earn a 20% profit margin on selling price _______ ...
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A company wishes to earn a 20% profit margin on selling price _______ ...
To understand the concept of profit margin and profit mark-up, let's break down the given information step by step.
Profit Margin:
Profit margin is the percentage of profit earned on the selling price (revenue). It is calculated by dividing the profit by the selling price and multiplying by 100. The formula for profit margin is as follows:
Profit Margin = (Profit/Selling Price) * 100
Profit Mark-up:
Profit mark-up, on the other hand, is the percentage of profit earned on the cost price. It is calculated by dividing the profit by the cost price and multiplying by 100. The formula for profit mark-up is as follows:
Profit Mark-up = (Profit/Cost Price) * 100
Given that the company wishes to earn a 20% profit margin on the selling price, we need to find the profit mark-up on the cost price that will achieve the required profit margin.
Let's assume the cost price of the product is 100.
Profit Margin Calculation:
Profit Margin = (Profit/Selling Price) * 100
20 = (Profit/(100 + Profit)) * 100
Solving this equation will give us the profit earned on the selling price.
Profit Mark-up Calculation:
Profit Mark-up = (Profit/Cost Price) * 100
Profit Mark-up = (Profit/100) * 100
Profit Mark-up = Profit
From the above calculations, we can conclude that the profit mark-up on the cost price is equal to the profit earned on the selling price.
Therefore, the correct answer is option 'B' - 25%, as it represents the profit mark-up on the cost price that will achieve the required 20% profit margin on the selling price.
Profit Margin:
Profit margin is the percentage of profit earned on the selling price (revenue). It is calculated by dividing the profit by the selling price and multiplying by 100. The formula for profit margin is as follows:
Profit Margin = (Profit/Selling Price) * 100
Profit Mark-up:
Profit mark-up, on the other hand, is the percentage of profit earned on the cost price. It is calculated by dividing the profit by the cost price and multiplying by 100. The formula for profit mark-up is as follows:
Profit Mark-up = (Profit/Cost Price) * 100
Given that the company wishes to earn a 20% profit margin on the selling price, we need to find the profit mark-up on the cost price that will achieve the required profit margin.
Let's assume the cost price of the product is 100.
Profit Margin Calculation:
Profit Margin = (Profit/Selling Price) * 100
20 = (Profit/(100 + Profit)) * 100
Solving this equation will give us the profit earned on the selling price.
Profit Mark-up Calculation:
Profit Mark-up = (Profit/Cost Price) * 100
Profit Mark-up = (Profit/100) * 100
Profit Mark-up = Profit
From the above calculations, we can conclude that the profit mark-up on the cost price is equal to the profit earned on the selling price.
Therefore, the correct answer is option 'B' - 25%, as it represents the profit mark-up on the cost price that will achieve the required 20% profit margin on the selling price.
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Community Answer
A company wishes to earn a 20% profit margin on selling price _______ ...
20/80×100=25%
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A company wishes to earn a 20% profit margin on selling price _______ is the profit marks up on cost, which will achieve the required profit margin ?a)33%b)25%c)20%d)None of theseCorrect answer is option 'B'. Can you explain this answer?
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