US CMA Part 2 · Chapter 6 · Question 13 of 22
Inglewood Shoes sets prices as a markup on variable cost. A product with a variable cost of $48 sells for $72. What markup percentage on variable cost is being used?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 50%
Explanation
Markup on variable cost = (price - variable cost) / variable cost = ($72 - $48) / $48 = $24 / $48 = 50%. 33.3% is the contribution margin ratio (a margin on price), not the markup on cost.
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