START & OPERATE A SMALL BUSINESS
Production / Distribution Chain
Chapter 27
NAME:
DATE:
Warm up: The manufacturing process starts with raw materials or parts, and transforms them
into finished products.
1. Calculate: Percentage Mark-up (dollar and % ) (page 324)
Item
Retail
Wholesale $ Markup $ % Markup
Price
Cost
%
Widget 1
$50.00
$30.00
$20.00
66.6%
Current
Hit DVD
$29.95
$16..00
Blank VHS
Tape
$7.99
$5.00
Blank
CD’s
$24.95
$9.00
Current
Hit Video
$19.45
$12.00
3½
Diskette
$11.05
$5.50
Notes
$Mark-up$ / Wholesale Cost
2. Think of a product that has dropped significantly in price during your lifetime. Write brief
explanation of why you think this occurred (three or four paragraphs).
3. Calculate: Gross Profit Margins (page 325)
Item
Retail Price
Wholesale
Cost
Gross Profit
Gross Profit
per
% Percentage %
$ Unit $
$25.00
55.5%
Notes
Widget 2
$45.00
$20.00
Soda Drink
Fountain
$1.00
$.08
Is why
Pepsi
owned
Pizza Hut
T – Shirt
Screen Print
$20.00
$4.50
(from China
to Store)
China
pays
workers
25 cents /
Gross
Profit
Unit /
Retail
Price
hr.
I Phone
$800.00
$195.00
Apple
Store
4. Calculate: Profit Margin
Item
Retail Price
Wholesale
Cost
Gross Profit
per
$ Unit
$55.00
Net Profit
(includes theft
– markdowns
– defects –
freight –
overtime pay,
etc.)
$6.00
Widget 3
USA Avg
$100.00
45.00
Software
$50.00
$20.00
$20.00
Tesla
(Start-up)
$120,000
$135,000
($20,000)
Gap
(Jeans)
$20.00
$6.50
$2.00
Profit Margin
%
(Net Profit /
Retail Price)
6%
5. Is a company guaranteed to earn a net profit? (explain)
6. What happens to the Net Profit?