Find out the Profit Amount ? Cost of Sales : 10 Profit : 20 % of Sales Ans: A: 2.0 B:2.5 C:1.67 D:3.0

must be Option B i.e.2.5

Option-B,2.5 is a correct answer.

As this is margin, margin is always calculated on sales and in calculating margin sales is always considered as100%.

 

Sales = Cost + Profit

X =10 + (20% * X)

X =10 +0.2X

X -0.2X =10

X (1 -0.2) =10

0.8X =10

X =10/0.8

X =12.5

Sales is12.5, as profit is20% of sales

Profit =20% of12.5

 

Profit =2.5

2.5 andswer is B

is

B:2.5

B2.5

Given cost of sales ......... $10 profit % .....................20% of sales Required Profit amount? solution: It is simple to find the sales amount from the given data. it is apparent that the percentage f the cost of sales is equal to80% of sales and it also apparent that the sales amount is equal to $10 ÷80% = $12.5 Then the required profit amount is $2.5 ($12.5 - $10 = $2.5) So choice B, is the answer for your question

To determine the Profit Amount, I will calculate the sales price, which is as follow

 

Sales price =       cost of sales +cost of sales * profit margin

Sales price=       10+(10*.2)

Sales price=       10+2

Sales Price=       12

 

 

Hence Profit Amount is2 (=12-10)

 

Note: it is little bit tricky question