# GMAT Math : Calculating profit

## Example Questions

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### Example Question #1 : Calculating Profit

Mark buys 1,000 shares of stock for the current stock price of $20 per share. If the stock price goes up to$25 per share, by what percentage does Mark increase his money?

25%

20%

50%

100%

125%

25%

Explanation:

Mark spends $20 * 1,000 shares =$20,000. When the stock price increases to $25/share, he makes ($25 – $20) * 1,000 shares =$5,000.

$5,000 /$20,000 =  = 25%

He does NOT increase his money by 125%, which would mean an additional $25,000, not$5,000.

### Example Question #2 : Calculating Profit

Mary works at a clothing store.  She makes $13/hour and works 40 hours a week. Working at the clothing store gives her a 25% discount on anything they sell. If she buys a sweater that retails for$50 and a jacket that retails for $144, what is her net profit for the week? Possible Answers: Correct answer: Explanation: Mary makes$13/hour and works 40 hours.  So she makes

However, we need to subtract the cost of the items that she bought.  If the sweater retails for $50, Mary buys it for because of her 25% discount. Similarly, she buys the jacket for . So her net profit is . ### Example Question #3 : Calculating Profit The profit equation for a certain manufacturing process is , where is the number of units. How much money will the plant make/lose if it sells units? Possible Answers: Correct answer: Explanation: ### Example Question #4 : Calculating Profit Company B produces toy trucks for a shopping mall at a cost of$7.00 each for the first 500 trucks and $5.00 for each additional truck. If 600 trucks were produced by Company B and sold for$15.00 each, what was Company B’s gross profit?

Explanation:

First of all, we need to know that

.

There are 600 trucks produced. According to the question, the first 500 trucks cost $7.00 each. Therefore, the total cost of the first 500 trucks is . The other 100 trucks cost$5.00 each for a cost of .

Add these together to find the cost of the 600 trucks:

The total profit is easier to calculate since the selling price doesn't change:

At this point we have both revenue and total cost, so the answer for gross profit is .

### Example Question #5 : Calculating Profit

Abe is a big gambler.  He is equally likely to win, lose, or break even.  When he loses, his loss is .  When he wins, he either makes or with equal probability.  How much money does Abe win or lose on average?

Abe wins $83. Abe loses$83.

Abe loses $100. Abe breaks even. Abe wins$200.

Abe loses $83. Explanation: To find the average, multiply each expected profit or loss by its probability: ### Example Question #6 : Calculating Profit A non-profit organization is selling shirts to raise money. They purchase 500 shirts at a cost of$5 per shirt. During the course of the month, they are only able to sell 388 shirts. They donate the extra shirts. If the  shirts sell for $13 each, how much does the organization earn/lose during this campaign? Possible Answers:$2,328

$4,000$3,594

$2,544$3,104

$2,544 Explanation: To calculate profit, we find the total revenue and subtract the total expense. The total revenue is the amount of money made from selling 388 shirts: The total expense is the amount of money spent on buying 500 shirts: ### Example Question #7 : Calculating Profit Find the number of units, , that a company must sell to break even if the profit equation is . Possible Answers: Correct answer: Explanation: Break even profit is . Plug this value into the equation to solve for the number of units: ### Example Question #8 : Calculating Profit Last year, a car dealer purchased four cars for$5,000 each, and then later in the year he bought eight more cars for $7,000 each. If this year the car dealer sells the 12 cars for a combined total of$126,000, what is his net profit?

Explanation:

Calculate the net profit by subtracting the cost of the cars from the gross profit:

### Example Question #9 : Calculating Profit

It costs $15,000 a month to operate Acme Widgets, Inc, plus$0.25 for every widgets produced.  Each widget sells for $0.35. If gross profit is measured by the total dollar amount of sales minus operating and production costs, how many widgets would Acme Widgets, Inc. have to sell to make a profit of$25,000?

25,000

600,000

550,000

375,000

400,000

400,000

Explanation:

We need to turn the word problem into a mathematical equation, and solve.

The basic profit equation is:

Where G = gross profit, R = revenue, F = fixed or operating costs, and V = variable or production costs.

We know that we want our gross profit to be $25,000, so . Now, R is revenue, the money that the company earns by selling its product. The company earns$0.35 for every widget sold, so , where w = number of widgets sold.

F is the operating cost, which is $15,000. V is the cost of producing the widgets, which is$0.25 per widget.

Plugging in our variables, we get:

The company would have to sell 400,000 widgets to make a profit of $25,000 ### Example Question #10 : Calculating Profit Read the problem below: The French Club wants to make and sell cookies in order to raise$500 for a field trip. The equipment they want to use costs $400 to rent and to operate, and the ingredients for the cookies cost 45 cents per cookie. The French Club wants to sell the cookies for$2 each. At this price, how many cookies will they need to sell in order to earn back the money they paid for the ingredients and the equipment rental and make a profit of $500? If is the number of cookies sold, then which of the following equations represents the cost function? Possible Answers: Correct answer: Explanation: Each cookie costs 45 cents, or$0.45, to make, so the price of the ingredients will be $0.45 times the number of cookies, or The other expense is a flat price of the rental of the equipment,$400.

Add the expressions to get the cost function

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