If sales is D 12,000, and the gross profit markup percentage is 25%. What is the cost of sales?

A gross profit markup is always calculated as a percentage of cost, not of selling price. This means selling price equals cost plus the markup percentage applied to cost.

Letting the cost of sales be \( C \), the relationship is:

Substituting the given sales figure:

So the cost of sales is D 9,600, and the gross profit on this sale is \( 12{,}000 - 9{,}600 = 2{,}400 \), which checks out as 25% of the D 9,600 cost, confirming the markup was applied correctly.

A common mistake is to calculate 25% of the sales figure directly (giving D 3,000 or D 9,000) as if markup were a margin on selling price. Remember: markup is a percentage of cost, while margin (gross profit percentage on sales) is a percentage of selling price; always check which one a question specifies before dividing or multiplying.