Profit and Loss: Formulas and Shortcuts
Profit: When a product is sold, profit is the amount of money that one earns more than the money he actually spent in buying the product.
Loss: When a product is sold, profit is the amount of money that one earns lesser than the money he actually spent in buying the product.
Thus, there are two terms involved in basic Profit and Loss. They are:
1. Cost Price (CP): The price at which goods have been bought by a retailer.
2. Selling Price (SP): The price at which goods are sold by a retailer.
Percentage Profit is to be calculated always on CP unless required.
Relation between CP, SP and Percentage Profit is,
Percentage loss is to be calculated always on CP unless required.
Here is an example to understand the percentage profit and loss formula:
Example: 100 apples are bought at the rate of Rs. 500 and sold at the rate of Rs. 84 per dozen. What will be the percentage of profit and loss?
Solution: We will solve this in steps
Step I: Given that C.P. of 100 apples = 500
Step II: Also given that per dozen S.P. of apples = 84
Step III: Now, we know that
Therefore, there is a profit of 40% in the whole selling process.
A certain percentage of the CP is added to itself to earn profit and this price is called marked price.
Relationship between marked price, discount and SP is the following:
Break even sales:
Profit and loss can be calculated in terms of break-even sales. Break even sales is the point in which one incurs neither profit nor loss in selling a number of units.
Formula for Break even sales:
Profit & Loss based on break-even sales
Now Profit and Loss can be calculated using Break even sales as follows: