ACCA PM · Chapter 3 · Question 2 of 9
A product will sell for $90. The company requires a mark-up of 25% on cost. The current estimated cost is $75 per unit. What is the cost gap per unit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $3
Explanation
With a mark-up of 25% on cost, selling price = 125% of cost. Target cost = $90 / 1.25 = $72. Cost gap = $75 - $72 = $3 per unit. Treating 25% as a margin on price would wrongly give a target cost of $67.50.
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