GMAT Focus EditionData InsightsMedium
A retail chain is planning its inventory for the upcoming holiday season across three product categories: Electronics, Home Goods, and Toys. The company has estimated the unit sales and profit margin per unit for each category. | Category | Estimated Unit Sales | Profit Margin per Unit | |---|---|---| | Electronics | 5,000 | $15 | | Home Goods | 8,000 | $10 | | Toys | 12,000 | $8 | Which product category is projected to generate the highest total profit, and what is that projected profit?
- AElectronics, $75,000
- BToys, $96,000
- CHome Goods, $80,000
- DElectronics, $100,000
Show answer & explanationAnswer & explanation
Correct answer: B. Toys, $96,000
To determine the total profit for each category, multiply the estimated unit sales by the profit margin per unit. Then, compare these total profits.
Why the other options are wrong
- A. Electronics: 5,000 units * $15/unit = $75,000. This is not the highest. This option is incorrect.
- C. Home Goods: 8,000 units * $10/unit = $80,000. This is not the highest. This option is incorrect.
- D. Electronics profit is $75,000, not $100,000. This option is incorrect.
Total Profit Calculation
Total profit is the total revenue minus total costs, or in this context, the sum of profit generated from each unit sold.
- Calculated as (Units Sold × Profit Margin per Unit).
- A key indicator of business financial health.
- Different from revenue, which doesn't account for costs.
Memory trick: Profit is what's left after all the hard work and sales.