A business operates on a gross profit margin of 33 /3%. Gross profit on a sale was $800, and expenses were $680. What is the net profit margin?

sales 100

Cos 66. 5

800 33-5

exp  680 

NP 120

3.75%

5%

11.25%

22.67%

Answer:

Net Profit margin

Net Profit margin =Net Profit/Sales x 100%

Determine the Sales first using the gross profit margin above

Gross Profit margin =Gross Profit/Sales x 100%

Gross Profit margin of 331/3 can be expressed as 33.33%. This can also be simplified as decimal by dividing by 100 into 0.3333

From the above equation, we can get sales as follows;

Sales=Gross profit/Gross profit margin

Sales=$800/0.3333

Sales=$2,400

Now determine the Net Profit margin

Net Profit margin =Net Profit/Sales x 100%

But,

Net Profit=Gross profit-Expenses

Net Profit=$800-$680=$120

Therefore,

Net Profit margin =$120/$2,400 x 100%

Net Profit margin =5%