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Hector decided to enter the mask business
Hector decided to enter the mask business. He purchased 5,000 masks online from an Italian manufacturer. These are fashion-forward masks for which Hector paid €4 each (current Euro/Dollar exchange rate is $1.21 per Euro). Hector decided to mark-up the product 25%. He succeeded in selling out his inventory.
• What, in US$, was Hector’s gross profit?
• What was the gross profit margin percentage?
Expert Solution
| [1] | Hectors's Gross profit | |||||
| 1euro=1.21 | ||||||
| Cost of purchase the one mask in $= | 4$*1.21 | |||||
| = | $4.84 | |||||
| Total cost of 5000 mask | = | 24200 | ||||
| (5000*4.84) | ||||||
| Selling price of 5000 mask | = | 24200+25% | ||||
| = | 30250 | |||||
| Gross profit | = | 30250-24200 | ||||
| = | 6050 | |||||
| [2] | Gross profit margin percentage | |||||
| GP margin | = | Selling price- cost price | *100 | |||
| selling price | ||||||
| = | 6050 | *100 | ||||
| 30250 | ||||||
| = | 20% |
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