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Question:Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost togross profit percentages based on sales price: 25% and 331 /3%. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: 331 /3% and 60%.

Short Answer

Expert verified

Gross profit as a percentage of the cost indicates the gross profit percentage on the basis of cost price, whereas gross profit as a percentage of the sales price indicates the gross profit percentage on the basis of the selling price.

Gross profit based on sales price equals 20% and 24.99%, respectively. Gross profit based on cost equals 49.99% and 150%.

Step by step solution

01

Step 1: 

Gross profit on selling price is determined by dividing percentage markup on the cost by the sum of 100% and percentage markup on cost, whereas gross profit on cost is determined by dividing gross profit on selling price by the difference of 100% and gross profit on selling price.

02

Step2:

Gross on selling price for gross profit on the cost of 25% is calculated as follows:

GrossProfitonSellingPrice=PercentageMarkuponCost100%+PercentageMarkuponCost=25%100%+25%=20%

03

Step 3:

Gross on selling price for gross profit on the cost of 33 1/3% is calculated as follows:

GrossProfitonSellingPrice=PercentageMarkuponCost100%+PercentageMarkuponCost=3313%100%+3313%=24.99%

04

Step 4:

Gross on cost for gross profit on the selling price of 33 1/3% is calculated as follows:

GrossProfitonCost=GrossProfitonSellingPrice100%-GrossProfitonSellingPrice=3313%100%-3313%=49.99%

05

Step 5:

Gross on cost for gross profit on the selling price of 60% is calculated as follows:

GrossProfitonCost=GrossProfitonSellingPrice100%-GrossProfitonSellingPrice=60%100%-60%=150%

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