Question

An item that cost $ 60 is to be sold for a price that will yield a gross profit ratio of 25 % . The selling price should be: Multiple Choice \[ $ 100 \] $ 50 $ 80 $ 75

Answer 1

The selling price would be $80

Step-by-step explanation:

Gross profit ratio is defined as the ratio of gross (total) profit divided by the gross (total) sales. If the profit is $100 on sales of $500, the gross profit ratio would be ($100/$500) or 0.25. This is usually expressed as a percentage, or 25%.

We can write this as Profit Ratio = (Profit)/(Sales)

In this case, we are given the cost ($60) and a profit ratio of 25% (or 0.25). Lets recognize that profit is equal to the sales minus the costs:

Profit = Sales - Cost.

Profit Ratio = (Profit)/(Sales)

Profit Ratio = (Sales - Cost)/(Sales)

0.25 = (Sales - $60)/(Sales)

0.25*(Sales) = (Sales - $60)

0.25*Sales = Sales - $60

-0.75Sales = -$60

Sales = $80