A perfume shop has a gross profit margin of 50% - OCR - GCSE Business - Question 4 - 2022 - Paper 1
Question 4
A perfume shop has a gross profit margin of 50%.
This means:
A. for every £10 of sales, it makes £5 profit after all costs have been paid
B. the perfume shop's v... show full transcript
Worked Solution & Example Answer:A perfume shop has a gross profit margin of 50% - OCR - GCSE Business - Question 4 - 2022 - Paper 1
Step 1
A. for every £10 of sales, it makes £5 profit after all costs have been paid
96%
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Answer
This statement is incorrect. With a gross profit margin of 50%, if the sales are £10, the profit is actually £5. However, it does not mean it is after all costs have been paid, as gross profit does not account for overheads and other expenses.
Step 2
B. the perfume shop's variable costs are exactly half of its fixed costs
99%
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Answer
This statement is incorrect. The gross profit margin does not provide any definite information about the relationship between variable costs and fixed costs.
Step 3
C. the shop charges customers double what it pays when buying the perfume
96%
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Answer
This statement is correct. A gross profit margin of 50% implies that for every amount spent by the consumer, the shop retains 50%. Therefore, if the shop pays £25 for a product, it would sell it for £50.
Step 4
D. to make £10 of profit, it needs to sell £50 of perfume
98%
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Answer
This statement is correct in a general scenario. Since the gross profit margin is 50%, to achieve a profit of £10, the sales revenue must be £20, not £50.
