Translation:The skirt costs twelve dollars, ma'am.
Actually, "lady" can be used as a translation of "señora", just as "gentleman" can be used as a translation of "señor". It depends on the context. You can't use "lady" or "gentleman" to address someone--you have to use "ma'am" or "sir". But as respectful terms used in the third person (e.g., "there is a lady here to see you"), "lady" and "gentleman" are fine.
Well, for all those who aren't native English speakers and look to these discussions for proper English as well as Spanish, I want to note that "ma'am" is the conventional spelling. "Mam" is a mainly British, informal word for "mother" (just as "mom" is in American English). Writing "mam" for "ma'am" will be considered a misspelling by most.
I am also North American (United States), and I had never seen "Ma'm". I was about to say that I could not find it anywhere in online dictionaries or references, but I finally found it in merriam-webster.com under the "Mam" entry. The results of a web search for "ma'm" are overwhelmingly results for "ma'am". Similarly, a search for "ma'm military" turns up only hits for "ma'am military", such as the Wikipedia page for "Military courtesy".
I am not questioning your experience--I'm just saying that mine is completely different: I'm seeing "ma'am" everywhere I look, and it's darned difficult to find any mention of "ma'm" at all.
There is no point in saying that here, because we don't know what your answer was. If, however, you copy and paste your exact answer here, then we can either tell you if there is a mistake somewhere, or if you should report during the lesson that your answer should be accepted.
Susan, I have used madam in place of ma'am and had it be correct. Next time be sure to report it if there is an issue. Also, if you copy your sentence in the discussion folks can help you identify any other errors that may be in the sentence which could actually be the reason for the error.