A 20 percent markup on cost is not the same as a 20 percent margin because margin is based on what?
Correct Answer
C) Selling price.
Margin is profit divided by selling price; markup is profit divided by cost.
Why This Is the Correct Answer
Margin is profit divided by selling price; markup is profit divided by cost.
Why the Other Options Are Wrong
Option A: Payroll tax only.
Payroll tax only. puts the item in the wrong financial bucket, timing, base, or comparison for markup versus margin.
Option B: Material cost only.
Material cost only. puts the item in the wrong financial bucket, timing, base, or comparison for markup versus margin.
Option D: Accounts payable.
Accounts payable. puts the item in the wrong financial bucket, timing, base, or comparison for markup versus margin.
Memory Technique
Two shelves for markup versus margin: cost side first or price side first.
Reference Hint
Study anchor (closed-book): memorize Markup versus margin from CSLB Law and Business Study Guide; CSLB 2026 Law Book / CSLB Law and Business Study Guide Business Finances; know the rule or calculation trigger without relying on exam-room lookup.
More Law & Business Questions
A Fresno homeowner wants a $725 cabinet repair and trim adjustment. Which contract step best matches CA home improvement requirements?
A project has $6,500 retainage withheld. The owner releases 60 percent of retainage at substantial completion. How much cash is released?
Cash is $52,500 and monthly burn is $17,500. How many months of runway are available?
A supplier offers 1.5 percent early-pay discount on a $22,000 invoice. What is the discount?
A balance sheet lists assets of $310,000 and liabilities of $185,000. What is owner's equity?
A job is estimated to cost $135,000. What price gives a 25 percent gross margin?
A customer invoice of $4,000 has a stated late charge of 1.5 percent. What late charge is added?
A bid has direct labor of $18,000, materials of $12,500, and equipment rental of $3,500. If the contractor adds 20 percent markup on direct cost, what is the bid price?
A contractor wants a 25 percent gross margin on a job with estimated cost of $60,000. What selling price gives that margin?
A completed project sold for $150,000 and had total cost of $126,000. What gross margin percentage did the project earn?