Considering the costs of materials, manufacturing, quality assurance, sales per unit, and profit per unit, which product from Botten's Bottles Ltd. offers the highest profit margin... Considering the costs of materials, manufacturing, quality assurance, sales per unit, and profit per unit, which product from Botten's Bottles Ltd. offers the highest profit margin?
Understand the Problem
The question is asking us to determine which product has the highest profit margin based on the provided costs of materials, manufacturing, quality assurance, and sales per unit. To solve this, we will need to calculate the profit margin for each product and compare them.
Answer
The product with the highest profit margin is **Oakthorpe** with a profit margin of approximately $28.6\%$.
Answer for screen readers
The product with the highest profit margin is Oakthorpe with a profit margin of approximately 28.6%.
Steps to Solve
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Calculate Total Cost Per Unit For each product, sum the costs of materials, manufacturing, and quality assurance. [ \text{Total Cost} = \text{Materials} + \text{Manufacture} + \text{QA} ]
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Calculate Profit Margin For each product, use the formula for profit margin: [ \text{Profit Margin} = \frac{\text{Sale per unit} - \text{Total Cost}}{\text{Sale per unit}} \times 100 ]
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Calculate Individual Profit Margins Apply the calculations for each product:
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Coppice I:
- Total Cost: $7.4 + 1.9 + 0.3 = 9.6$
- Profit Margin: $\frac{12.9 - 9.6}{12.9} \times 100 \approx 25.6%$
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Coppice II:
- Total Cost: $6.8 + 2.4 + 0.4 = 9.6$
- Profit Margin: $\frac{12.6 - 9.6}{12.6} \times 100 \approx 23.8%$
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Oakthorpe:
- Total Cost: $5.3 + 1.1 + 0.1 = 6.5$
- Profit Margin: $\frac{9.1 - 6.5}{9.1} \times 100 \approx 28.6%$
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Kingshurst-A:
- Total Cost: $13.5 + 3.4 + 0.6 = 17.5$
- Profit Margin: $\frac{20.0 - 17.5}{20.0} \times 100 \approx 12.5%$
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Kingshurst-S:
- Total Cost: $15.2 + 4.1 + 0.7 = 20.0$
- Profit Margin: $\frac{25.0 - 20.0}{25.0} \times 100 = 20%$
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Coppice I:
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Compare Profit Margins Compare the profit margins calculated for each product to determine the highest.
The product with the highest profit margin is Oakthorpe with a profit margin of approximately 28.6%.
More Information
The profit margin is a key indicator of a product's profitability relative to its sales price. Oakthorpe's materials, manufacturing, and QA costs are lower than others, leading to a better profit margin.
Tips
- Incorrectly summing the total costs by missing an item.
- Confusing absolute profit and profit margin; remember that profit margin is a percentage of sales.
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