Final answer:
The formula 'Profit bonus desired / Profit bonus %' calculates the total profit required to receive a specified profit bonus at a certain rate. Similar calculations are used to determine the percentage change in income after a pay raise, as seen with a $2 raise from a $10 hourly wage, which is a 20% increase.
Step-by-step explanation:
The formula Profit bonus desired / Profit bonus % gives you the total amount of profit necessary to obtain a desired profit bonus at a certain profit bonus percentage rate. For example, if a job pays a certain hourly rate and the employee receives a raise, the percentage change in pay indicates the growth rate of their income. This is similar to calculating the necessary total profit to achieve a certain bonus.
If your job pays $10 per hour and you receive a $2 per hour raise, the percentage change in your pay would be calculated as $2/$10 which equals 0.20 or 20%. Similarly, if you want a profit bonus of a certain amount and you know the profit bonus percentage, you can rearrange this formula to find out the total profit needed.
Additionally, understanding average profit as defined by price minus average cost helps to determine if the profit will be positive or negative based on the market price and average costs.