Hi, I'm having a problem with one of the AT Kearney mock exam questions. Can you please suggest a solution and your rationale? Thanks!
Question: At a school fair, Ana sells cookies prepared by her mother. Ana buys the cookies for 115% of the costs her mother pays to make them. Ana’s profit margin is 30%. What share of her mother’s cost is Ana’s profit?
Hi Jan,
It seems like an uncommon ratio to calculate, but iIwould try the following:
Does this help?
What share of her mother’s cost is Ana’s profit?
=> Her mothers costs are 100%. We need to find Ana's Profit relative to those 100%.
Ana’s Profit (relative to her mothers cost) = Revenue - Cost = Revenue - 115% = ???
We can calculate Ana's Revenue by using the calculation formula for her Profit Margin:
Profit Margin = Profit / Revenue
Profit Margin = (Revenue - Cost) / Revenue
30% = (Revenue - 115%) / Revenue
30% * Revenue = Revenue -115%
70% * Revenue = 115%
Ana’s Revenue = 164,29% (rel. to her mothers cost)
This means Ana sells the cookies for 164,29% of the price that her mother paid to prepare them.
Ana’s Profit relative to her mothers cost is therefore: Profit = Revenue - Cost = 164,29% - 115% = 49,29%
Thank you! Now it is clear. :)
Thank you very much! It helped a lot. :)
How did you get 100% revenue = 164 dollars?