In this problem, to solve for the gross profit, you have to deduct the cost of each knapsack to its selling price.
The gross profit of Jim is $3.50 ($10.50 - $7).
To compute the gross profit rate, you have to divide the gross profit ($3.50) to the cost of each knapsack ($7).
$3.50 / $7 = 0.5 or 50%
Therefore, Jim makes 50% profit on each knapsack.
