Question

If the unit selling price is 2.50 and the unit cost is 1.00 what action is needed to maintain the gross margin percentage when unit cost increase 0.25

Answer 1

The original gross margin is (2.50 / 1.00) - 1 = (2.5 - 1) = 1.5 = 150%

the cost increases 0.25, is an increase of (0.25 / 1.00) = 25%

in order to keep the same gross margin, you need to increase the sale price by 25%

2.50*1.25 = 3.125

Then the gross margin is (3.125 / 1.25) - 1 = (2.5 - 1) = 1.5 = 150% ( same as original )