Patch Work's product, Patch Supreme, sells for $62.00 and its variable cost is $44.60 while the cost of goods sold per unit is $42.80.What is Patch Work's markup percentage on variable cost and what is its gross margin percentage?

Question

Quizplus · Accepted Answer

To calculate the markup percentage on variable cost, we use the following formula:
Markup percentage on variable cost = (selling price - variable cost) / variable cost x 100%
= (62 - 44.60) / 44.60 x 100%
= 39%

To calculate the gross margin percentage, we use the following formula:
Gross margin percentage = (selling price - cost of goods sold) / selling price x 100%
= (62 - 42.80) / 62 x 100%
= 31%

Therefore, the correct answer is (C) 39%; 31%.

Patch Work's Product, Patch Supreme, Sells for $62