Real-Life Math -- Solution
First you need to make sure you're dealing with the same currency
in all calculations.
Price per pound = $0.81 US /
$0.75 American dollars per Canadian dollar
Price per pound = $1.08 Cdn
One
pound of steer will gross $1.08 Cdn. So the gross revenue for 100 pounds of
steer is $108.
Now you must subtract your costs and other expenses
from this figure to calculate gross profit per 100 pounds of steer. For every
100 pounds, it costs you $2.50 in freight charges and $0.50 in vaccination
expenses. Plus, grazing, feeding and other expenses come to $103 per 100 pounds.
Gross
profits per 100 pounds = $108 - ($2.50 + $0.50 + $103)
Gross profits per
100 pounds = $108 - $106
Gross profits per 100 pounds = $2
So
you make a gross profit of $2 per 100 pounds of steer. But each steer weighs
850 pounds, and you are selling 1,000 of them.
Total
profit = $2 per 100 pounds x (850 pounds / 100 pounds) x 1,000
Total profit
= $2 x 8.5 x 1,000
Total profit = $17 x 1,000
Total profit = $17,000
So
you made $17,000 on this sale. But is that a good profit margin? How much
did you have to spend to make that much profit?
Initial
cost = ($2.50 per 100 pounds + $0.50 per 100 pounds + $103 per 100 pounds)
x (850 pounds / 100 pounds) x 1,000 animals
Initial cost = $106 per 100
pounds x 8.5 x 1,000
Initial cost = $901 x 1,000
Initial cost = $901,000
You
had to spend $901,000 in order to make a $17,000 profit.