A salesperson for Tricon is considering a price concession to close a sale

Accounting Nov 30, 2020

A salesperson for Tricon is considering a price concession to close a sale. The salesperson’s original bid was $22,475 (list price). Tricon’s cost of goods sold equals 65% of list price. The salesperson offered a 9% discount to the close the sale. Calculate the dollar change in gross margin. (round to the nearest whole dollar)

I know the answer is -$2023, but I do not know how to calculate it.

Expert Solution

Original Gross Margin = Sales - Cost of goods Sold
= $22475 - $14608.75 = $7866.25
Cost of Goods Sold = $22475 x 65% = $14608.75

Proposed Gross Margin = $20452.25 - 14608.75 = $5843.50
Discount price = $22475 x 91% = $20452.25

Change in Gross Margin = $7866.25 - 5843.50 = $2022.75 or $2023

Alternatively (Shortcut)
Change in Gross Margin = $22475 x 9% = $2022.75 or $2023

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