A business spends $40 \%$ of its revenue on salaries, $30 \%$ on operational costs, and the remaining on profit. If the revenue is R500,000, calculate the amount allocated to each category.
Answer (1)
Calculate the amount spent on salaries: S a l a r i es = 0.40 × R 500 , 000 = R 200 , 000 .
Calculate the amount spent on operational costs: Op er a t i o na l C os t s = 0.30 × R 500 , 000 = R 150 , 000 .
Calculate the amount allocated to profit: P ro f i t = R 500 , 000 − R 200 , 000 − R 150 , 000 = R 150 , 000 .
The amounts allocated to salaries, operational costs, and profit are S a l a r i es : R 200 , 000 ; Op er a t i o na lC os t s : R 150 , 000 ; P ro f i t : R 150 , 000 .
Explanation
Understanding the Problem We are given that a business has a revenue of R500,000. We need to calculate how much of this revenue is allocated to salaries, operational costs, and profit, given the percentages for each category.
Calculating Salaries First, we calculate the amount allocated to salaries. The business spends 40% of its revenue on salaries. To find this amount, we multiply the total revenue by 40% (or 0.40).
Salaries Amount The calculation for salaries is: S a l a r i es = 0.40 × R 500 , 000 = R 200 , 000
Calculating Operational Costs Next, we calculate the amount allocated to operational costs. The business spends 30% of its revenue on operational costs. To find this amount, we multiply the total revenue by 30% (or 0.30).
Operational Costs Amount The calculation for operational costs is: Op er a t i o na l C os t s = 0.30 × R 500 , 000 = R 150 , 000
Calculating Profit Finally, we calculate the amount allocated to profit. The remaining revenue after salaries and operational costs is allocated to profit. To find this amount, we subtract the amounts spent on salaries and operational costs from the total revenue.
Profit Amount The calculation for profit is: P ro f i t = R 500 , 000 − R 200 , 000 − R 150 , 000 = R 150 , 000
Final Answer Therefore, the amounts allocated to salaries, operational costs, and profit are R200,000, R150,000, and R150,000, respectively.
Examples
Understanding how a business allocates its revenue is crucial for financial planning and decision-making. For instance, if a small bakery has a monthly revenue of R20,000, and they allocate 50% to ingredients, 30% to rent and utilities, and the remaining 20% to profit, they can calculate these amounts to manage their budget effectively. This breakdown helps them see exactly where their money is going, allowing them to make informed decisions about pricing, cost-cutting, or investments to increase profitability. By understanding these allocations, the bakery can ensure they are running a sustainable and profitable business.
