Page 99 - BA2 Integrated Workbook STUDENT 2018
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Marginal and absorption costing
5.2 Profit margin on sales
Profit margin is calculated as a percentage of sales.
Required margin
Profit = Total cost × –––––––––––––––––––
1 – required margin
Total cost
Selling price = ––––––––––––––––––
1 – required margin
In above example, if the company required a margin on sales of 20%, the profit
would be $10 and the selling price would be $50.
Illustrations and further practice
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