Question

You decide to begin selling glow sticks at the local swap mart. Your cost for each glow stick is $1.20 plus you have to pay a fixed weekly fee of $230 for the booth. Your plan is to sell each glow stick for $3.18.

a) Calculate the profit per glow stick.
b) Determine the total profit after selling 100 glow sticks.
c) Find the break-even point in terms of the number of glow sticks sold.
d) Evaluate the profit margin as a percentage.

Answer 1

The profit per glow stick is $1.98, the total loss after selling 100 glow sticks is $32, the break-even point is at least 117 glow sticks sold, and the profit margin is approximately 62.26%.

Step-by-step explanation:

To calculate the profit per glow stick, you need to subtract the cost per glow stick from the selling price. The selling price is $3.18, and the cost per glow stick is $1.20. Therefore, the profit per glow stick is:

Profit per glow stick = Selling price - Cost per glow stick = $3.18 - $1.20 = $1.98.

b) To determine the total profit after selling 100 glow sticks, calculate:

Total profit = Profit per glow stick × Number of glow sticks sold = $1.98 × 100 - $230 (fixed weekly fee) = $198 - $230 = -$32.

c) The break-even point occurs when the total profit is zero. To find this, set up the equation:

Profit per glow stick × Number of glow sticks sold = Fixed weekly fee

$1.98 × Number of glow sticks sold = $230

Number of glow sticks sold = $230 / $1.98

Number of glow sticks sold ≅ 116.16

Since you cannot sell a fraction of a glow stick, you would need to sell at least 117 glow sticks to break even.

d) The profit margin is calculated as (Profit per glow stick / Selling price) × 100%. Substituting the values:

Profit margin = ($1.98 / $3.18) × 100% ≅ 62.26%