A small firm allocates 28% of its gross profits into an account for insurance. Last year, the firm’s gross profit was $400,000. What amount was deposited into the insurance account?
  1. $100,000
  2. $108,000
  3. $109,500
  4. $112,000
  5. $128,000
Explanation
Answer: To calculate this mentally, use this idea: x% of y = y% of x. Therefore, 28% of 400,000 is the same as 400,000% of 28. Multiply 4 x 28 to get 112, then add the zeroes back at the end ($112,000). You know that this is a reasonable answer because 28% is a little over ¼, and ¼ of 400,000 is 100,000.

Key Takeaway: When you are calculating percentages of round numbers, it is helpful to know that x% of y is the same as y% of x.

Using this, you are often doubling, tripling, or multiplying by a single number, then adding the zeroes back at the end.

This takes some practice, but it works well for some people.

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