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Toy Buyer

Real-Life Activities

Real-Life Math -- Solution

You know that each toy costs you $12. You want to make a 40 percent gross profit on each toy. The gross profit is based on the retail price, which you haven't figured out yet.

Letx = retail price

The retail price is equal to the cost of the toy plus your 40 percent gross profit.

x = 0.40x + 12
x - 0.4x = 12
x (1 - 0.4) = 12
0.6x = 12
x = 12 / 0.6
x = 20

The retail price of the item would be $20. That means the markup is $8. What percentage is that?

$8 markup / $12 cost x 100 = 66.7

You have to markup the price by 66.7 percent in order to get a 40 percent gross profit. If you sell 100 toys, what is your total gross profit?

Gross profit = (retail price x 100 toys) - (cost x 100 toys)
Gross profit = ($20 x 100) - ($12 x 100)
Gross profit = $2,000 - $1,200
Gross profit = $800

That means that 100 toys would generate $800 of gross profit. (Note: you must still factor in costs.)