bill owns a company (bills gates) that manufactures fence panels. bills gates had a net profit margin last…
bill owns a company (bills gates) that manufactures fence panels. bills gates had a net profit margin last quarter of 18%. which of the following actions will not help bill increase his net profit margin this year, assuming he sells the same number of fence panels?\na. increase the price per panel.\nb. use cheaper lumber to construct panels.\nc. offer panels in a \buy one get one free\ special.\nd. reduce workforce and labor costs to construct panels.
Answer
Explanation:
Step1: Recall net - profit margin formula
Net - profit margin = $\frac{Net\ Profit}{Revenue}$. Net profit = Revenue - Cost.
Step2: Analyze option a
Increasing the price per panel increases revenue. With the same number of units sold and costs remaining the same (or changing less than the revenue increase), net profit increases, and so does the net - profit margin.
Step3: Analyze option b
Using cheaper lumber reduces the cost of production. With revenue constant (same number of units sold at the same price), net profit increases, and the net - profit margin increases.
Step4: Analyze option c
A "buy one get one free" special means that for every two panels sold, only the price of one is collected. This reduces the revenue per unit sold. With costs remaining the same and revenue decreasing, net profit decreases, and the net - profit margin decreases.
Step5: Analyze option d
Reducing the workforce and labor costs reduces the cost of production. With revenue constant (same number of units sold at the same price), net profit increases, and the net - profit margin increases.
Answer:
c. Offer panels in a "buy one get one free" special.