Understanding Profit Margin

Oct 13, 2025 by recoveryshake.com 13 views

In this problem, we are given the selling price of a hand-carved statue and the profit margin, and we need to find the original cost of the statue. This is a classic problem in mathematics that involves understanding the concept of profit margin and how to calculate the original cost.

Understanding Profit Margin

Profit margin is the percentage of profit made on the sale of a product or service compared to its cost. It is calculated by dividing the profit by the cost and multiplying by 100. In this problem, we are given that the profit margin is 35%, which means that the profit made on the sale of the statue is 35% of its cost.

Calculating the Original Cost

Let's assume that the original cost of the statue is x. Since the profit margin is 35%, the profit made on the sale of the statue is 35% of x, which is 0.35x. The selling price of the statue is $670, which is the sum of the original cost and the profit. Therefore, we can set up the following equation:

x + 0.35x = 670

Combine like terms:

1.35x = 670

Divide both sides by 1.35:

x = 670 / 1.35

x = 496.30

Therefore, the original cost of the statue is $496.30.

Conclusion

In this problem, we used the concept of profit margin to calculate the original cost of a hand-carved statue. We set up an equation based on the given information and solved for the original cost. The correct answer is D. $496.30.

Key Takeaways

Profit margin is the percentage of profit made on the sale of a product or service compared to its cost.
To calculate the original cost, we need to set up an equation based on the given information and solve for the original cost.
In this problem, we used the formula: x + 0.35x = 670, where x is the original cost.

Practice Problems

A company sells a product for $120, which is a 25% profit over its cost. What is the original cost of the product?
A store sells a shirt for $80, which is a 30% profit over its cost. What is the original cost of the shirt?
A person sells a book for $50, which is a 20% profit over its cost. What is the original cost of the book?

Answer Key

$96
$61.54
$41.67
Profit Margin Q&A =====================

In this article, we will answer some common questions related to profit margin and how to calculate it. Whether you are a business owner, a student, or just someone interested in learning more about profit margin, this article is for you.

Q: What is profit margin?

A: Profit margin is the percentage of profit made on the sale of a product or service compared to its cost. It is calculated by dividing the profit by the cost and multiplying by 100.

Q: How do I calculate profit margin?

A: To calculate profit margin, you need to know the selling price and the cost of the product or service. You can use the following formula:

Profit Margin = (Profit / Cost) x 100

Where:

Profit is the amount of money made on the sale of the product or service
Cost is the original cost of the product or service

Q: What is the difference between profit margin and markup?

A: Profit margin and markup are related but different concepts. Markup is the amount of money added to the cost of a product or service to determine the selling price. Profit margin, on the other hand, is the percentage of profit made on the sale of a product or service compared to its cost.

Q: How do I calculate the original cost of a product or service?

A: To calculate the original cost of a product or service, you need to know the selling price and the profit margin. You can use the following formula:

Original Cost = Selling Price / (1 + Profit Margin)

Where:

Selling Price is the amount of money made on the sale of the product or service
Profit Margin is the percentage of profit made on the sale of the product or service compared to its cost

Q: What is the difference between a high profit margin and a low profit margin?

A: A high profit margin means that a business is making a large amount of money on the sale of a product or service compared to its cost. A low profit margin means that a business is making a small amount of money on the sale of a product or service compared to its cost.

Q: How do I determine the profit margin of a business?

A: To determine the profit margin of a business, you need to know the selling price and the cost of the product or service. You can use the following formula:

Profit Margin = (Profit / Cost) x 100

Where:

Profit is the amount of money made on the sale of the product or service
Cost is the original cost of the product or service

Q: What is the importance of profit margin in business?

A: Profit margin is an important concept in business because it helps businesses determine their pricing strategy and make informed decisions about their products or services. A high profit margin can indicate that a business is making a good profit, while a low profit margin can indicate that a business is struggling to make a profit.

Q: How do I use profit margin to make informed decisions in business?

A: To use profit margin to make informed decisions in business, you need to understand the concept of profit margin and how to calculate it. You can use the following steps:

Determine the selling price and the cost of the product or service.
Calculate the profit margin using the formula: (Profit / Cost) x 100.
Use the profit margin to determine the pricing strategy for the product or service.
Make informed decisions about the product or service based on the profit margin.

Conclusion

In this article, we have answered some common questions related to profit margin and how to calculate it. Whether you are a business owner, a student, or just someone interested in learning more about profit margin, this article is for you. We hope that you have learned something new and useful from this article.