Gross Profit Margin Calculation

Steps:

• Gross profit margin = (Sales - Cost of Sales) / Sales = 20% = 0.2.
• Let S = sales in dollars.
• (S - 40,000) / S = 0.2.
• S - 40,000 = 0.2S.
• 0.8S = 40,000.
• S = 40,000 / 0.8 = 50,000.

Why none are correct:

• Calculated sales are $50,000; no option matches this value based on the standard gross profit margin formula.

Why A is wrong:

• $80,000 sales yield (80,000 - 40,000) / 80,000 = 50% margin.

Why B is wrong:

• $88,000 sales yield (88,000 - 40,000) / 88,000 ≈ 54.5% margin.

Why C is wrong:

• $30,000 sales yield negative gross profit (-$10,000), impossible for positive 20% margin.

Why D is wrong:

• $32,000 sales yield negative gross profit (-$8,000), impossible for positive 20% margin.

Final answer: None