If a wholesale price is 105 and the final sale price is 125, what is the gross margin percentage based on the final sale price?

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Prepare for the Professional Golf Management (PGM) 3.1 All Levels Test with multiple-choice questions and explanations. Enhance your knowledge and excel in your exam!

Multiple Choice

If a wholesale price is 105 and the final sale price is 125, what is the gross margin percentage based on the final sale price?

Explanation:
The key idea is that gross margin based on the final sale price equals the gross profit divided by the final sale price. First find gross profit: 125 − 105 = 20. Then divide by the final sale price: 20 ÷ 125 = 0.16, or 16%. So the margin relative to what the customer pays is 16%. (This contrasts with markup on cost, which would be 20 ÷ 105 ≈ 19.05%.)

The key idea is that gross margin based on the final sale price equals the gross profit divided by the final sale price. First find gross profit: 125 − 105 = 20. Then divide by the final sale price: 20 ÷ 125 = 0.16, or 16%. So the margin relative to what the customer pays is 16%. (This contrasts with markup on cost, which would be 20 ÷ 105 ≈ 19.05%.)

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