Lizzy: Jenna runs a wholesale business. She pays $3 for each widget and resells it for $8. Every month she has to pay $10,000 in rent, 20% of her total profit in taxes, and $2,500 each to four workers. If Jenna sells 5000 widgets one month, how much is her total profit or loss?.
Me: Hmmm, let me think. I think this is the detailed solution:
First calculate how much Jenna spends on salaries: $2,500 * 4 = $10,000. Next find Jenna's total fixed costs by adding the cost of salaries and rent: $10,000 + $10,000 = $20,000. Next calculate how much profit Jenna makes on each widget by subtracting the cost from the sale price: $8 - $3 = $5. Now multiply the profit per widget by the number of widgets sold: $5 * 5000 = $25,000. Now subtract Jenna's costs from her sales to find her total profit before taxes: $25,000 - $20,000 = $5,000. Now multiply Jenna's profit by her 20% tax rate to find how much she owe in taxes: $5,000 * .2 = $1,000. Now subtract Jenna's taxes from her profit before taxes to find her total profit: $5,000 - $1,000 = $4,000. Final answer: 4000.