1. Net Profit pp. 522-524 16-3 SECTION

2. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 2 of 18 16-3 Key Words to Know operating expenses (p. 522) The costs of running a business, such as salaries, rent, utilities, and taxes, also called overhead.

3. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 3 of 18 16-3 How do I calculate overhead expenses? Overhead = Selling Price × Overhead Percent How do I calculate the net profit? Net Profit = Markup – Overhead Formulas

4. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 4 of 18 16-3 Sport Shop purchases water tubes for $44.98 each. It sells the tubes for $89.99 each. The owner estimates the overhead expenses to be 40 percent of the selling price of the merchandise. What is the net profit on each tube? Example 1

5. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 5 of 18 16-3 Find the markup. Selling Price – Cost $89.99 – $44.98 = $45.01 Example 1 Answer: Step 1

6. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 6 of 18 16-3 Find the overhead. Selling Price × Overhead Percent $89.99 × 40% = $35.996 or $36.00 Example 1 Answer: Step 2

7. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 7 of 18 16-3 Find the net profit. Markup – Overhead $45.01 – $36.00 = $9.01 Example 1 Answer: Step 3

8. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 8 of 18 16-3 Anamarie’s Shoppe buys chemises at a cost of $12.78. Anamarie’s sell the chemises at a selling price of $24.49. Its management estimates the overhead expenses to be 34 percent of the selling price of the merchandise. What is the net profit on each chemise sold? Example 2

9. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 9 of 18 16-3 Find the markup. Selling Price – Cost $24.49 – $12.78 = $11.71 Example 2 Answer: Step 1

10. SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 16-3, Slide 10 of 18 16-3 Find the overhead. Selling Price × Overhead Percent $24.49 × 34% = $8.3266 or $8.33 Example 2 Answer: Step 2

11. 523-524: 1-12 16-3 END OF SECTION