Question

WoodFab Furniture buys 100 furniture units for $2,000 each and spends $80,000 in expenses for advertising, salesperson commission, and store rent. It sells them all at an average price of $5,000 per unit. To quantify a solution in a selling situation, calculate the profit margin that WoodFab Furniture makes.

A) 10%
B) 15%
C) 20%
D) 25%

Answer 1

The profit margin for WoodFab Furniture is 44%.

Step-by-step explanation:

The profit margin can be calculated by subtracting the total costs from the total revenues and dividing the result by the total revenues, then multiplying by 100 to get a percentage.

Let's calculate the profit margin for WoodFab Furniture:

1. Total revenues = 100 units * $5,000 per unit = $500,000
2. Total costs = $2,000 per unit * 100 units + $80,000 = $280,000
3. Profit = Total revenues - Total costs = $500,000 - $280,000 = $220,000
4. Profit margin = (Profit / Total revenues) * 100 = ($220,000 / $500,000) * 100 = 44%

The profit can be calculated by subtracting the total costs from the total revenue, which gives us $500,000 - $280,000 = $220,000. To find the profit margin, we divide the profit by the total revenue and multiply by 100 to get the percentage: ($220,000 / $500,000) × 100 = 44%.