Calculate the gross margin for a product with a cost price of R350 that is selling for R503.13 (incl. VAT)
Calculate the gross margin for a product with a cost price of R350 that is selling for R503.13 (incl. VAT)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Calculate the gross margin for a product with a cost price of R350 that is
selling for R503.13 (incl. VAT)
Expert Solution
Step 1
Cost price and Selling price of a product has been given and gross margin has been asked.
- Cost price is the amount incurred to produce a product.
- Selling price is the amount at which the product is sold to final consumers and is arrived at considering the cost price and a markup /margin to the product value.
- Hence Gross margin in % is calculated as [(Selling price - cost price) / Selling price]*100.
- VAT rate is taken to be 15%. It has to be excluded from the selling price to arrive at the correct gross margin of sales.
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