Question

If a company has $340,000 worth of sales and $230,000 of costs, the relative profit (P) correct to 2 significant figures is:

a) 31%
b) 33%
c) 32%
d) 30%

Answer 1

To calculate the relative profit, subtract costs from sales to determine the accounting profit, divide it by sales, and multiply by 100 to get a percentage. The relative profit for the company with the provided figures is 32%, correct to 2 significant figures.

Step-by-step explanation:

The subject of this question is the calculation of relative profit in the context of business or accounting. To find the relative profit, which is essentially the percentage profit relative to sales, we subtract the costs from sales to find the accounting profit, and then divide this by sales, finally multiplying by 100 to get a percentage.

Using the figures provided:

1. Subtract costs from sales: $340,000 (sales) - $230,000 (costs) = $110,000 (accounting profit).
2. Find the relative profit by dividing the accounting profit by sales: $110,000 / $340,000 = 0.3235.
3. Multiply by 100 to get a percentage: 0.3235 * 100 = 32.35%.
4. Since we need the answer correct to 2 significant figures, it becomes 32%.

The correct answer to the student's question is (c) 32%.