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Which of the following would be the best scenario for a company and why: 1. Revenue...

Which of the following would be the best scenario for a company and why:

1. Revenue of $100 and COGS of $35

2. Revenue of $200 and COGS of $120

Business   Accounting   
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Answer #1

1. Revenue = $ 100

Cost of goods sold = $ 35

Gross profit = revenue - cost of goods sold

Gross profit = $ 65.

Gross margin percentage = (65/100)x100

Gross margin percentage = 65%

2. Revenue = $ 200

Cost of goods sold = $ 120

Gross profit = $ 80

Gross margin percentage = (80/200) x 100

Gross margin percentage = 40%.

The first case is having a greater gross margin percentage than second case and hence first case would be the best scenario.

SUMMARY:

First case is having more gross margin percentage than second case and hence first case will be best suitable one.

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