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Business Math Concepts and Applications

Math skills and their application to the operation of a Facility can enhance your bottom line and help you grow your business. The following Business Math Concepts and Applications play an important role in any business.

  • Set Aside Levy
  • Cost of Goods Sold Percentage
  • Labor Cost Percentage
  • Cost of Goods Sold Calculation
  • Net Profit Calculation
  • Net Profit Percentage
  • Item Profit Percentage
  • Employee Earnings Calculation and Deductions
  • Product Pricing to Achieve Profit Goals
  • Sales Tax Considerations in Pricing Product
  • Sales Tax

If you are unsure about these concepts and applications, you can do internet searches using the above terms as key words on websites such as google.com or you can talk to other vendors who you respect and trust as to how they approach such concepts, calculations and applications in their business. 

The important thing to remember is that these concepts and calculation methods, which may require knowledge of addition, subtraction, multiplication and/or division, may be needed to answer a question on the Selection Test. Be familiar with a portable calculator or other devise that you have confidence in using to assist you in such problem solving. You will be allowed to use it as long as its talking feature can be accessed by earphone. There is no advantage to let other licensees, with whom you may be competing, hear what you are doing with your device.

MATH EXAMPLES

Set Aside Levy: 

The set-aside levy is currently six percent. Your total proceeds for the month were $10,000.00. Your cost of goods sold were $4,000.00.  Your total labor costs were $1,500.00.  And your other business expenses were $500.00.  What is the amount of your set-aside levy for the month?

Formula: Total Proceeds – Total Expenses = Net Proceeds
$10,000 - ($4,000 + $1,500 + $500) = $4,000
Net Proceeds x Set-Aside Levy = Set-Aside Amount Due
$4,000 x .06 = $240.00

Cost of Goods Sold Percentage:

For the month, your vending drink sales were $2,500.00, your vending snack sales were $3,250.00, your over the counter sales were $4,250.00; and your cost of goods sold (COGS) were $4,000.00.  What is your COGS percentage for the month? 

Formula: COGS / (Drink + Snack + OTC Sales) = COGS %   
$4,000 / ($2,500 + $3,250 + $4,250) = COGS %
$4,000 / $10,000 = .40 or 40%

Labor Cost Percentage:

For the month, your vending drink sales were $2,500.00, your vending snack sales were $3,250.00, your over the counter sales were $4,250.00; and your employee gross wages were $1,500.00.  What is your labor cost percentage for the month? 

Formula: Gross Wages / (Drink + Snack + OTC Sales) = Labor Cost %   
$1,500 / ($2,500 + $3,250 + $4,250) = Labor Cost %
$1,500 / $10,000 = .15 or 15%

Cost of Goods Sold: 

Your beginning inventory for the month was $4,351.75; your purchases were $6,647.50; and your ending inventory was $4,873.25.  What is your cost of goods sold?       

Formula: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold
$4,351.75 + $6,647.50 - $4,873.25 = $6,126.00

Net Profit: 

Your total sales for the month were $15,797.94; your cost of goods sold were $4,855.42; your gross employee wages were $1,280.00; your payroll taxes were $97.92 and other business expenses were $125.00.  What is your net profit?   

Formula: Sales - (COGS, Gross Wages, Payroll Taxes, Other Bus Expenses) = Net Profit
$15,797.94 - ($4,855.42 + $1,280.00 + $97.92 + $125.00) = $9,439.60

Net Profit Percentage: 

Your total sales for the month were $8,505.50; your cost of goods sold were $4,659.92; your gross employee wages were $1,331.81; your payroll taxes were $148.50; and other business expenses were $153.77.  What is your net profit percentage?

Formula: Sales - (COGS, Gross Wages, Payroll Taxes, Other Bus Expenses) = Net Profit
Net Profit / Total Sales = Net Profit Percentage
$8,505.50 - ($4,659.92 + $1,331.81 + $148.50 + $153.77) = $2,211.50
$2,211.50 / $8,505.50 = .26 = 26%

Item Profit Percentage:

What is your profit percentage if the item costs $0.84 and sells for $1.50?  

Formula: Selling Price - Item Cost = Profit Amount.              
Profit Amount / Selling Price = Profit Margin %          
$ 1.50 - $ 0.84 = $ 0.66
$ 0.66 / $ 1.50 = .44 = 44%

Employee Payroll Taxes: 

You pay your full-time employee $8.25 per hour.  The employee will work 40 hours per week and gets
paid every 2 weeks. You are required to withhold 6.2% in Social Security taxes plus 1.45% in Medicare taxes from the employee’s paycheck. How much Social Security and Medicare taxes must be withheld from their paycheck every two weeks?  

Formula: Hourly wage x Total hours worked = Gross Wages
Gross Wages x (Soc. Sec. Tax %+ Medicare Tax %) = Amount to be withheld
($8.25 x 80) = $660.00 x (.062 + .0145) = $660.00 x .0765 = $50.49

Product Pricing:

Your cost for a certain brand of potato chips is $0.30 per bag and you want to have a food cost percentage of 40%.  What would be your selling price?   

Formula: Cost / Food Cost % = Selling Price
.30/ .40 = $.75

Sales Tax Consideration in Pricing:  

You wish to sell a breakfast special for a final price of $3.00 (after sales tax), and you operate
in a county with a seven and one-half percent (7 ½ %) sales tax.  What is the price for the breakfast special before tax?

Formula: Price (after tax) / (1 + Sales Tax %) = Price (before tax)
$3.00 / 1.075 = 2.79069 = $2.79

Sales Tax:

Your vending machines sell only food and beverage items.  The total sales receipts from your vending machines for the month is $1,000.00.  Your non-taxable sales were $100.00 (water).  Your machines are located in a county with a sales tax rate of 6.5%, which results in a sales tax divisor of 1.0686.  What is the amount of sales tax due for the month? 

Formula: Total Receipts from Sales - Non-Taxable Sales = Total Taxable Sales
$1,000 – $100 = $900

Total Taxable Sales / Divisor = Gross Taxable Sales
$900 / 1.0686 = $842.22

Total Taxable Sales – Gross Taxable Sales = Tax Due
$900 - $842.22 = $57.78

Florida Bureau of Business Enterprise

Providing Tools and Support for Legally Blind Vendors in the Food Service Industry