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The following is Pharoah Company’s income statement for the past year. Sales revenue $560,000 Cost of goods sold 336,000 Gross margin 224,000 Operating expenses 130,000 Operating income $94,000

Solution

1.) Markup percentage on cost of goods sold

(Net profit/cost of goods sold)*100

($94000/336000)*100=28%

2.) Mark up percentage on total cost

(Net profit/cost of goods sold)*100

total cost = cost of goods sold + operating expenses=$336000+130000=$466000

($94000/466000)*100=20%

3.) Gross margin percentage

(Gross profit/sales)*100

($224000/$560000)*100=40%

4.) Selling price based on gross profit margin.

Cost price =$40

Gross margin as calculated in part 3=40%

selling price = cost price /(100-gross margin percentage)=$40/(100-40)

$40*100/60=66.67 round to $67 PER UNIT OF PRODUCT

answer is $67 PER UNIT OF PRODUCT