A Aventura project is expected to cost $975,000. What selling price produces a 25% gross margin on sales?
Correct Answer
D) $1,300,000
For margin on sales, cost is the remaining percentage of the selling price.
Why This Is the Correct Answer
For margin on sales, cost is the remaining percentage of the selling price.
Why the Other Options Are Wrong
Option A: $1,218,750
$1,218,750 is below the supported result for gross margin pricing; it likely uses the wrong base, period, or account bucket.
Option B: $1,235,000
$1,235,000 is below the supported result for gross margin pricing; it likely uses the wrong base, period, or account bucket.
Option C: $1,365,000
$1,365,000 is above the supported result for gross margin pricing; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Owner Prices money shelf: cost for markup, price for margin.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Planning for Profits, The Relationship Between Volume and Profit; use the job ledger figures in the stem and recompute the same accounting measure.
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