Question

Furniture store is selling a dinette set for $750. Their gross profit margin is 45% and...

Furniture store is selling a dinette set for $750. Their gross profit margin is 45% and their operating expenses are 15% of the selling price. What is the profit made when the dinette set is sold at the regular price? What is the break even price for the dinette set? What would the profit or loss be if the store discounted the dinette set by 25% ?

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Answer #1

Let the cost of the dinette set be $ x. Since the gross profit margin is 45% when the dinette set is sold for $750, hence x(1.45) = 750 so that x = 750/1.45 = 517.24 ( on rounding off to the nearest cent). Thus, the cost of the dinette set is $ 517.24.

The operating expenses at 15 % of $ 750 are 0.15*$ 750 = $ 112.50.

Therefore, the profit made when the dinette set is sold at the regular price ( i.e. $ 750) is $ 750 - $ 112.50 -$ 517.24 = $ 120.26.

The cost price + the operating expenses = $ 517.24 + $ 112.50 = $ 629.74 .Hence, the break -even price for the dinette set is $ 629.74.

If the store discounted the dinette set by 25%, the selling price would be 75 % of $ 750 i.e. $ 562.50. Then the loss would be $ 629.74 -$ 562.50 = $ 67.24.

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