EBM N4 | Gross Profit Percentage Calculation
Sihle runs a bookshop, called Rose Bookshop, in a busy shopping centre. There are three slow-moving products at the shop and she wonders how she can change these products into cash. The three products are Xhosa storybooks, novels and Church Thymes. The cost price of the Xhosa storybooks, novels and Church Thymes amount to R50, R75 and R35 respectively. She sells the Xhosa storybooks for R75, the novels for R90, and the Church Thymes for R50. The Xhosa storybooks, novels and Church Thymes amount to 45%, 35% and 20% of total sales respectively. The fixed costs and variable costs per month amount to R1 500 and R400 respectively.
Gross Profit Percentage Calculation for Each Book
Sihle owns Rose Bookshop and wants to determine the gross profit percentage for her slow-moving products: Xhosa Storybooks, Novels, and Church Thymes. This will help her decide how to improve sales and profitability.
Formula for Gross Profit
Gross Profit = Selling Price - Cost Price
Formula for Gross Profit Percentage
Gross Profit % = (Gross Profit / Selling Price) × 100
Xhosa Storybooks
- Selling Price: R75
- Cost Price: R50
- Gross Profit: 75 – 50 = R25
- Gross Profit %: (25 / 75) × 100 = 33%
Novels
- Selling Price: R90
- Cost Price: R75
- Gross Profit: 90 – 75 = R15
- Gross Profit %: (15 / 90) × 100 = 17%
Church Thymes
- Selling Price: R50
- Cost Price: R35
- Gross Profit: 50 – 35 = R15
- Gross Profit %: (15 / 50) × 100 = 30%
From the calculations, Xhosa Storybooks have the highest profit margin (33%), followed by Church Thymes (30%) and Novels (17%). Sihle can use this information to adjust prices, promote higher-margin products, or offer discounts to boost sales.