A store paid $350 for a couch and sold it for $550. What
percentage of the selling price was profit?
The Correct Answer and Explanation is :
To determine what percentage of the selling price was profit, we can use the following formula:
[
\text{Percentage of Profit} = \left( \frac{\text{Profit}}{\text{Selling Price}} \right) \times 100
]
Step 1: Calculate Profit
First, we need to find the profit. Profit is calculated as the difference between the selling price and the cost price.
[
\text{Profit} = \text{Selling Price} – \text{Cost Price}
]
[
\text{Profit} = 550 – 350 = 200
]
Step 2: Calculate Percentage of Profit
Next, we can substitute the profit and the selling price into our formula:
[
\text{Percentage of Profit} = \left( \frac{200}{550} \right) \times 100
]
Now we perform the division:
[
\frac{200}{550} \approx 0.3636
]
Now multiply by 100 to convert it into a percentage:
[
0.3636 \times 100 \approx 36.36
]
Thus, the percentage of the selling price that was profit is approximately 36.36%.
Explanation:
In this scenario, the store purchased a couch for $350 and sold it for $550. The profit made from the sale is $200, which is calculated by subtracting the cost price from the selling price.
To understand the profitability in a more relatable context, this percentage (36.36%) indicates that for every dollar earned from selling the couch, about 36 cents is profit.
Knowing the profit percentage is crucial for businesses as it helps assess their pricing strategies and operational efficiency. A higher percentage typically suggests that the business is managing costs effectively while maximizing revenue. In retail, understanding these metrics aids in decision-making regarding discounts, promotions, and inventory management, ensuring sustainable profitability in a competitive market.