Lesson Profit

2 Lesson California Standards: Number Sense 1.3 Convert fractions to decimals and percents and use these representations in estimations, computations, and applications. Number Sense 1.7 Solve problems that involve discounts, markups, commissions, and profit and compute simple and compound interest. What it means for you: You’ll learn what profit is and how to find profit as a percent of a company’s sales. Profit Lesson Key words: profit revenue expenses percent sales

3 Lesson If you buy something and then sell it for more than the amount that it cost you, the extra money that you get is called profit. Lesson Because you end up with more money than you started with, you can think about profit as a percent increase. Profit

4 Lesson Profit is the Amount of Money that a Business Makes Lesson A business has to spend money buying stock and paying staff. The amount of money that a business spends is called its expenses. A business also has an income from selling its products or services. The total amount of money that a business brings in is called its revenue. Profit

5 Lesson Profit is the Amount of Money that a Business Makes Lesson The profit that a business makes is just the difference between its revenue and its expenses. Profit = Revenue – Expenses Profit

6 Example 1 Lesson A film had a revenue of $55 million in ticket sales and $35 million in licensing agreements. It had expenses of $4 million in advertising and $48 million in production costs. What profit did the film make? Solution Solution follows… = $90,000,000 – $52,000,000 = $38,000,000 The film’s total revenue = $55,000,000 + $35,000,000 = $90,000,000 The film’s total expenses = $4,000,000 + $48,000,000 = $52,000,000 Profit = Revenue – Expenses Profit

7 1. Janet buys a rare baseball card for $15. She later sells it to another collector for $18. What profit has she made? 2. This year a company had a revenue of $500,000 and $356,000 of expenses. What profit did the company make this year? 3. A school held a fund-raiser. They paid $200 to hire a band, and $400 for food. They took $1000 in ticket sales. How much profit did the event make? 4. A bookstore’s total expenses in one year consisted of $300,000 to buy stock, and $150,000 to pay staff and cover other expenses. Their profit was $40,000. What was their total revenue? Lesson Guided Practice Lesson Solution follows… $3 $400 $144,000 $490,000 Profit

8 Lesson Profits are Often Given as Percents Lesson You can also work out a percent profit. This compares the amount of profit to the amount of sales revenue. Profit

9 Example 2 Lesson A company makes a profit of $90,000 on total sales of $720,000. What is their profit as a percent of sales? Solution Solution follows… × 100 = 12.5, so their profit is 12.5% of their sales. The company made $90,000 profit on sales of $720,000. Write this as a fraction, and convert it to a decimal. = Now change the decimal to a percent by multiplying by 100. $90,000 $720,000 Profit

10 5. Sayon’s lemonade stand made a $20 profit. He sold $80 worth of lemonade. What profit did he make as a percent of sales? 6. A company made a profit of $6000 on total sales of $40,000. What was their profit as a percent of sales? 7. Sophia buys a set of books for $75. She later sells the books to a collector for $90. What percent profit has she made? 8. Company A made a 12% profit on sales of $295,000. How much profit did they make? Lesson Guided Practice Lesson Solution follows… 20 ÷ 80 = 0.25 =25% 295,000 × 12% = $35, ÷ 40,000 = 0.15 = 15% (90 – 75) ÷ 90 = » 17% Profit

11 Lesson You Can Compare Profits Using Percents Lesson Businesses often use percents to compare the profits that they have made in consecutive years. This shows how the company is performing over time. Profit

12 Example 3 Lesson This year, Company B increased its profits by 5% over the previous year. If last year’s profit was $43,900, what was this year’s profit? Solution Solution follows… $43,900 + $2195 = $46,095 Write the percent of the increase as a fraction: 5% = Work out the amount of the increase: Now add the amount of the increase to the original profit: × $43,900 = 0.05 × $43,900 = $2195 Profit

13 Example 4 Lesson Last year, Company C made profits of $40,000. This year, they made profits of $28,000. What was the percent decrease in their profits? Solution Solution follows… = 0.3 $12,000 $40,000 Find the amount of the profit decrease: $40,000 – $28,000 = $12,000 Now divide the amount of the decrease by the first year’s profits: Change the decimal to a percent by multiplying by 100: 0.3 × 100 =30, so they had a 30% decrease in profit. Profit

14 9. This year, Company D increased its profits by 10% over last year. If last year’s profits were $12,000, what was this year’s profit? 10. Company E’s profits fell by 4% this year compared to last year. If last year’s profits were $29,500, what were this year’s profits? 11. Last month, Company F made profits of $1250. This month, they made profits of $1500. Find the percent increase in their profits. 12. Last year, Company G made profits of $200,000. This year, they made profits of $192,000. Find the percent decrease in their profits. Lesson Guided Practice Lesson Solution follows… 10% × 12,000 = , = $13,200 (1500 – 1250) ÷ 1250 = 20% 4% × 25,500 = ,500 – 1180 = $28,320 (200,000 – 192,000) ÷ 200,000 = 4% Profit

15 1. In one year, a company has a total revenue of $185,000 and total expenses of $155,000. What were the company’s profits that year? 2. A website selling clothes made a profit of $7890 in a month. In the same month its revenue was $12,390. Find its expenses for that month. 3. A toy store makes $12,000 profit on sales of $300,000. What percent profit has the store made? 4. A grocer buys $270 of fruit. He sells it for $ What is his profit? What is his percent profit? Independent Practice Solution follows… Lesson $13.50, 5% $30,000 $4500 4% Profit

16 5. This year, Company H’s profits fell by 7% compared to the previous year. If last year’s profit was $22,500, what was this year’s profit? 6. Last month, a store made profits of $4800. This month, they made profits of $5400. What was the percent increase in their profits? 7. Your class organizes a dance as a fund-raiser. You spend $100 hiring a DJ, $180 on food, and $40 on tickets and fliers. You have 50 tickets — if they all sell, what will you need to price them at to make a 25% profit? Independent Practice Solution follows… Lesson $20, % $8 Profit

17 Lesson Round Up Profit is the money that a business is left with when you take away what it spends from what it takes in sales. Percent change in profit is a way of measuring the performance of a business over time. Profit