SEARCH HOME
 Math Central Quandaries & Queries
 Question from tony: which is the correct way to figure 30% profit? 1) 1000 product 500 labor 50 permit 1550 total cost 1550x1.3=2015 2) 1000 product 500 labor 50 permit 1550 total cost 1-.3=.7 1550/.7=2214

Hi Tony,

Is this the exact way the question was worded? If so then I am not sure which calculation is deemed to be correct.

In both cases the total cost is $\$1550.$In the first option you find 30% of the cost ($0.30 \times \$1550 = \$465$) and add it to the cost to arrive at the selling price ($\$1550 + \$465 = \$2015$). In other words the selling price is $1.30 \times \$1550 = \$2015.$ This is commonly called a 30% markup.

In the second option suppose the selling price is $\$S$and you want your profit to be 30% of the selling price. Thus your cost is$100\% - 30\% = 70\%$of the selling price and hence$\$1550 = 0.70 \times \$S.$Dividing both sides by$0.70$gives$\$S = \frac{\$1550}{0.70} = \$2214.$ This is commonly called a 30% margin.

Hence in the first option your profit is 30% of your cost and in the second case your profit is 30% of what your customer paid.

Harley

Math Central is supported by the University of Regina and The Pacific Institute for the Mathematical Sciences.