EXERCISES 8.2
Percents in fi nal answers should be rounded to two decimal places.A. Gross Profi t Margin- Complete the following table by fi lling in the gross profi t margin based on the given costs and selling prices:
Item Cost Price Gross Profi t MarginA $39.03 $49.99
B $2.44 $4.88
C $73.00 $125.00
D $32,591 $50,000- Complete the following table by fi lling in the gross profi t and gross profi t margin based on the given costs and selling
prices:
Item Cost Price Gross Profi t Gross Profi t MarginA $7.62 $10.95
B $31.43 $57.50
C $108.23 $204.99
D $0.52 $0.75- Eddie’s Bike Shop sold a bike for $749.99, for which Eddie’s cost was $493.57. Calculate the gross profi t and gross
profi t margin for this item. - A grocer sells milk for $2.49 a gallon. The grocer’s cost is $2.37 per gallon. Find the gross profi t margin.
- Ludd’s Electronics had sales totaling $1,547,919 last year. The cost of the goods sold was $993,225. Find the gross
profi t margin.
Copyright © 2008, The McGraw-Hill Companies, Inc.
Exercises 8.2 347particular model lawnmower for $375, but if other stores are selling the same model for
$300 you probably won’t have too much luck selling it for this price. On the other hand, if
you’ve calculated that you should sell a chain saw for $99 but your competitors are selling
it for $129, you might want to seize the opportunity to raise your price and claim a higher
percentage profi t.
It is common practice to offer some items at very low margins because of strong
competition, or even as “loss leaders” sold below cost to attract customers (who hope-
fully will also buy other, higher margin items). Other items, for which competition is
less fi erce and customers are less price sensitive, may be offered for sale with very high
profi t margins. Successful pricing is a matter of balancing low and high profi t margin
items to successfully compete for business while earning a good overall profi t margin.
Figuring out how to manage that balancing act, though, requires good judgment and a
solid understanding of the business and its competitive environment.