What is the per-shirt gross margin?

What is the per-shirt gross margin?

• A. $0.77
• B. $0.84
• C. $0.83
• D. $0.90

Answer: (C)

Calculating the amount you keep from each shirt means looking at the price you sell it for and subtracting the direct cost to make that shirt. This per-unit gross margin shows how much is left to cover other expenses and profit, before overhead. If a shirt sells for $3.50 and it costs $2.67 to produce, the gross margin per shirt is 3.50 minus 2.67, which equals 0.83. That’s the amount earned per shirt after the basic production cost. The other numbers would require different production costs: for example, 0.77 would come from a cost of 2.73, 0.84 from a cost of 2.66, and 0.90 from a cost of 2.60. Given the stated cost, 0.83 is the correct per-shirt margin.

Calculating the amount you keep from each shirt means looking at the price you sell it for and subtracting the direct cost to make that shirt. This per-unit gross margin shows how much is left to cover other expenses and profit, before overhead.

If a shirt sells for $3.50 and it costs $2.67 to produce, the gross margin per shirt is 3.50 minus 2.67, which equals 0.83. That’s the amount earned per shirt after the basic production cost.

The other numbers would require different production costs: for example, 0.77 would come from a cost of 2.73, 0.84 from a cost of 2.66, and 0.90 from a cost of 2.60. Given the stated cost, 0.83 is the correct per-shirt margin.