Problem 12-34-1. Gross margin is calculated as gross profit / revenue.

Product a

Product B

Product C

Product D

Gross Margin

12,000 / 32,000 = 37.5%

17,600 / 88,000 = 20%

56,000 / 280,000 = 20%

63,000 / 144,000 = 43.75%

The product that is the most profitable is Product D.

2. The best way to start this question is to figure out the price and COGS per unit for each product. For Product a, the price was $32,000 / 2900 = $11.03 and the COGS per unit is $6.89. For Product B, the price per unit is $20.46 and the COGS per unit is $16.37. For Product C. The price per unit is $51.37 and the COGS per unit is $41.10. For Product D. The price per unit is $90 and the COGS per unit is $50.63.

The next step is to produce an income statement for each customer...
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