When creating media buy authorizations, how would an agency's 15% gross fee be calculated?

When determining how to calculate an agency's 15% gross fee, it's essential to understand the relationship between net cost and gross cost. The gross fee is typically calculated based on the net cost of the media buy, reflecting the amount that the agency will earn on top of the actual media costs incurred.

In this case, if the net cost is referred to as the amount the client pays to the media and the agency's fee is 15% of this amount, the formula for calculating gross cost involves adjusting for that fee. Specifically, to represent the gross cost in terms of net cost, you would divide by the remaining percentage after the fee has been accounted for. Since the agency keeps 15%, they are allowing for 85% of the net to apply to gross, leading to the formula net cost divided by 0.85. This accurately reflects how much gross cost is needed to yield a net amount after the fee has been deducted.

Thus, the correct method to calculate the gross cost from the net cost, considering the agency's 15% gross fee, is to divide by 0.85, leading to the correct answer.