A Miami Gardens proposal must recover cost of $318,000 and produce a 26.5% gross margin on sales price. What selling price is required?
Correct Answer
A) $432,653.06
For gross margin on sales price, price equals cost divided by one minus the margin rate.
Why This Is the Correct Answer
For gross margin on sales price, price equals cost divided by one minus the margin rate.
Why the Other Options Are Wrong
Option B: $402,270.00
$402,270.00 is below the supported result for gross margin pricing; it likely uses the wrong base, period, or account bucket.
Option C: $1,200,000.00
$1,200,000.00 is above the supported result for gross margin pricing; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $344,500.00
$344,500.00 is below the supported result for gross margin pricing; it likely uses the wrong base, period, or account bucket.
Memory Technique
Gross Margin Pricing fence: markup starts at cost, margin looks back from price.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Financial Analysis, Markup and Gross Profit; use the job ledger figures in the stem and recompute the same accounting measure.
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