# How to find out gross profit, percent mark up and net profit

Michael, Corey, and Jessica received an SBA loan to start a business. They operated the business for twelve months without agreement on the formal or legal form of ownership and structure. However, they all worked together and contributed equally to the operations. The business makes and sells Aggie Pride Hug Pillows.

Read the following and respond accordingly. You must show your calculations and logical steps taken to get credit. (Example: Gross Profit = revenue minus total production expenditure)

a.) In the first year, the business made and sold 6000 units of Pillows. It costs \$5.00 per unit to manufacture the product and this does not include the operating expenditures. If the team sold each unit for \$11.00, what is the gross profit in this first twelve months?

b.) What is the percentage (%) mark up on per unit cost?

c) .If the operating expenditure per unit is \$4.00, what is the net profit in this first year?

d.) If the business is required to pay a 5% tax on its net profit, what are the tax amount and the profit after tax?

e.) If the three owners decide to share the net profit equally, how much will each receive and what form of business organization is defined by this decision? Explain?

#### Solution Summary

The solution provides step-by-step explanations how to find the gross profit, percent mark up and net profit.