Profit Margin
He would need to account for purchasing raw materials for snacks, cooking it in oil and using gas for burning stove, packaging the food in proper plastic bags and providing the retailers a profit margin because even they should have an incentive to sell these snacks. Let’s say the cost of manufacturing snacks worth Rs.100 is Rs.85 and giving the retailers a margin, Rs.5, so he would make a profit of Rs.10.
Now, retailers and vendors request for more stock of his snacks as the demand is continuously rising and they are running out of stock very fast. Mehta is pleasantly surprised as he had not foreseen this demand for his food and is very happy.
Patrick Abboud
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