In response to complaints about high prices, a grocery chain runs the following

Question

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $3 to go buy $60 worth of groceries, then your child makes twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements:

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $3 to go buy $60 worth of groceries, then your child makes twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements:

Explanation / Answer

Now, the profit margin of the Store is Net profit/Total sales

Net profit is 16.5 M Sales is 660 M

Hence profit margin of the store = 16.5/660 = 0.025 = 2.5%

Since the child is suppose to make twice as much as we make, the profit margin of the child will be: 2* profit margin of the store = 2*2.5 = 5%. Therefore, prodit margin of child will be 5%

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