Calculate the net profit for an item sold for $59 that has a $38 cost of goods sold and 15% operating expense cost.
Net Profit = $[?]
Answer (1)
Calculate the operating expense: 0.15 × 59 = 8.85 .
Calculate the gross profit: 59 − 38 = 21 .
Calculate the net profit: 21 − 8.85 = 12.15 .
The net profit is 12.15 .
Explanation
Problem Analysis We are given the selling price, the cost of goods sold, and the operating expense percentage. We need to find the net profit.
Calculate Operating Expense First, we need to calculate the operating expense. The operating expense is 15% of the selling price, which is $59 . So, we calculate: Op er a t in g E x p e n se = 0.15 × S e ll in g P r i ce = 0.15 × 59 = 8.85
Calculate Gross Profit Next, we calculate the gross profit. The gross profit is the selling price minus the cost of goods sold. So, we calculate: G ross P ro f i t = S e ll in g P r i ce − C os t o f G oo d s S o l d = 59 − 38 = 21
Calculate Net Profit Finally, we calculate the net profit. The net profit is the gross profit minus the operating expense. So, we calculate: N e t P ro f i t = G ross P ro f i t − Op er a t in g E x p e n se = 21 − 8.85 = 12.15
Final Answer Therefore, the net profit is $12.15 .
Examples
Understanding net profit is crucial in business. For example, if you're selling lemonade, knowing your net profit helps you determine if your pricing covers the cost of lemons, sugar, and your time. If your net profit is too low, you might need to adjust your prices or find cheaper supplies. This concept applies to any business, from small startups to large corporations, ensuring they make informed decisions about pricing and expenses.
