Question

A branch of Jack’s Hardware has been told by its head office to sell goods at a percent gross margin of 40%. What percent markup should the branch use?

Answer 1

The branch should use 140% markup.

Let x be the selling price before before office's call.

And y be the price after it.

Then 

\(\frac{y - x}x \times 100 = 40\)

⇒ \(y - x = \frac{40x}{100} = \frac{2x}5\)

⇒ \(y = \frac{2x}5 + x = \frac{7x}5 = \frac 75 \text{of } x\)

\(= \left(\frac 75\times 100 \%\right) \text{of } x\)

\(= 140 \% \text{ of } x\)

Hence, they should markup 140% to gain a gross margin of 40%.