A retailer buys a set of plates for 𝑅𝑀 320. Operating expenses incurred during the
sale of these plates are 8 % of the cost price. If the retailer makes a 25 % net profit
based on selling price, find the:
i. selling price
ii. gross profit
iii. net profit
iv. breakeven price
v. maximum markdown that could be offered to customers so that there is no
profit and loss.
vi. net profit or loss if the new selling price is 𝑅𝑀 400.
1. 320+0.08*320 = 345.60 = total cost.
345.60+0.25*345.60 = 432 = selling price.
2. 432-320 = 112.
3. 432-345.60 = 86.40.
4. 345.60.
5. 86.40.
6. 400-345.60 =
To find the answers to these questions, we will need to calculate certain values based on the given information.
Given:
- Cost price of the plates: RM 320
- Operating expenses: 8% of the cost price
- Net profit: 25% of the selling price
Let's calculate the answers step by step:
i. Selling Price:
To find the selling price, we need to calculate the total cost first. The total cost includes the cost price and the operating expenses. Operating expenses are 8% of the cost price, so we can calculate it as follows:
Operating Expenses = 8% of Cost Price
= (8/100) * RM 320
= RM 25.60
Total Cost = Cost Price + Operating Expenses
= RM 320 + RM 25.60
= RM 345.60
Now, to calculate the selling price, we can use the formula for including a net profit in the selling price:
Selling Price = Total Cost + Net Profit
= RM 345.60 + 25% of Selling Price
We can solve this equation to find the selling price:
Selling Price = RM 345.60 + 0.25 * Selling Price
0.75 * Selling Price = RM 345.60
Selling Price = RM 460.80
So, the selling price is RM 460.80.
ii. Gross Profit:
Gross Profit is the difference between the selling price and the cost price. We can calculate it as follows:
Gross Profit = Selling Price - Cost Price
= RM 460.80 - RM 320
= RM 140.80
So, the gross profit is RM 140.80.
iii. Net Profit:
Net Profit is the profit made after deducting the operating expenses. We can calculate it as follows:
Net Profit = Gross Profit - Operating Expenses
= RM 140.80 - RM 25.60
= RM 115.20
So, the net profit is RM 115.20.
iv. Breakeven Price:
Break-even price is the price at which there is no profit or loss. It can be calculated by dividing the total operating expenses by (1 - profit margin ratio). In this case, the profit margin ratio is 0.25 (25%).
Breakeven Price = Operating Expenses / (1 - Profit Margin Ratio)
= RM 25.60 / (1 - 0.25)
= RM 25.60 / 0.75
= RM 34.13 (approx.)
So, the breakeven price is approximately RM 34.13.
v. Maximum Markdown:
The maximum markdown that could be offered to customers without making a profit or loss can be calculated by finding the difference between the selling price and the breakeven price.
Maximum Markdown = Selling Price - Breakeven Price
= RM 460.80 - RM 34.13
= RM 426.67 (approx.)
So, the maximum markdown that could be offered is approximately RM 426.67.
vi. Net Profit or Loss with a new selling price:
To determine the net profit or loss with a new selling price, we need to calculate the profit or loss based on the new selling price compared to the total cost.
New Selling Price = RM 400
Net Profit or Loss = New Selling Price - Total Cost
= RM 400 - RM 345.60
= RM 54.40
So, with the new selling price of RM 400, there will be a net profit of RM 54.40.