A company sells three different products.The first costs $8 and sells for $16,the second costs $18 and sells for $45,while the third costs $36 and sells for $120.
A)The gross profit percentages on the individual products are 50%,60%,and 70%,respectively.
B)The third product is the highest margin good.
C)If the company can persuade some customers to switch to the third product,overall gross profit percentage will increase.
D)All of the answers are acceptable.

Question

Quizplus · Accepted Answer

Gross Profit% = [(Net Sales - COGS)/Net Sales] * 100 GP% Product One: [($16 - $8)/$16] * 100 = 50%
GP% Product Two: [($45 - $18)/$45] * 100 = 60%
GP% Product Three: [($120 - 36)/$120] * 100 = 70%
The product with the highest mark-up over cost will have the greatest profit margin.

A Company Sells Three Different Products