Published on July 3, 2009
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PROFIT & LOSS
Basic Terms Cost Price (C.P): Price at which one buys anything Selling Price (S.P): Price at which one sells anything Profit/Loss: Difference between the SP & CP. If the difference is positive it is called the profit and if negative it is called as loss. Profit/Loss %: profit/loss as a percentage of the C.P. Margin: Normally is in % terms only. This is the profit as a percentage of S.P. Marked Price: Price of the product as displayed on the label. Discount: Less given on the marked price before selling Markup: Increment on the cost price before selling
Formulae Gain = S.P – C.P Loss = C.P – S.P Pr ofit (in Rs) Loss ( in Rs) Pr ofit % = × 100 Loss % = × 100 C.P C.P 100 + P % 100 − L % SP = × CP OR SP = × CP 100 100 100 − D % 100 − D % CP = × MP OR CP = × MP 100 + P % 100 − L%
Example: A person sells 36 oranges for one rupee and suffers a loss of 4%. How many oranges per rupee to be sold to have a gain of 8%? Solution: Let ‘K’ is the cost price of each orange. Since he is giving 36 oranges for one rupee, the selling price of 1 an orange = Rs. 36 1 Since he has 4% loss, the selling price of each orange is 0.96K = 36 1 0.96 x 36 K= 1.08 1 1 0.96 36 32 To get 8% gain he has to sell it for 1.08K = x = Rs. So for one rupee, he has to give 32 oranges to get a gain of 8%.
Discount and Successive Discount You always come across different offers attracting the customers such as “Buy 1get 2 Free” or “Buy 3 get 5 Free” or “SALE 50% + 40%”. Can you calculate the discount offered to you? Most of us are not aware about the offer given to us. The percentage of the discount offered in the first case is not 200% but it is 66.66% only. The discount is always on the number of items sold, not on the number of items purchased.
Discount and Successive Discount In case of successive discounts we can treat the problem as the problem of successive percentage change and can use the formula If a% and b% are the two successive discounts given like (40% + 50%) Then, axb Net Discount = a +b − % 100 Example 40 x30 40% + 30% discount = 40 + 30 − % 100 = (70 – 12)% = 58%.
Marked Price It is also known as list price or Tag price which is written on the item. The markup price written is always greater than the actual C.P of the item and the percentage rise in the markup price is on the C.P of the item. M.P − C.P Percentage increase in the Markup price = x100 C.P
After allowing a discount of 11.11%, a trader still makes a gain of 14.28%. At how much percent above the cost price does he mark on his goods? (1) 28.56% (2) 35% (3) 22.22% (4) None of these
Relation between Profit, Loss, Markup, and Discount Always remember that the profit percent or loss percent can be easily calculated as the product of multiplying factors (MF) of markup and Discount together. i.e. MF of Profit = (MF of Markup) x (MF of Discount) Example: The price of a trouser is marked 50% more than its cost price and a discount of 25% is offered on the marked price of the trouser by the shopkeeper. Find the percentage of profit/loss. Solution: MF of profit = (MF of Markup) x (MF of Discount) = 1.50 x 0.75 = 1.125 So; profit = 0.125 = 12.5%
Two Different Articles Sold at same Selling Price Article 1 Article 2 Cost Price = C1 Cost Price = C2 Sale price = S % gain = x % loss = x Over all loss 2 Overall % loss = x (where x is the percent profit or loss on % the transaction) 10
I sold two watches for Rs.300 each, one at a loss of 10% and the other at a profit of 10%. What is the percent loss (–) or the percent profit (+) that resulted from the transaction ? (1) (+) 10 (2) (–)1 (3) (+) 1 (4) 0
Two Different Articles Sold at same Selling Price Example: Each of the two horses is sold for Rs. 1875. The first one is sold at 25% profit and the other one at 25% loss. i. What is the % loss or gain in this deal? ii. What is the total loss or gain (in rupees) in the above example? Solution: 2 25 i. It is loss of % = 6.25 % loss. 10 th 1 ii. Since he got 6.25 % loss means 16 loss. th 15 ⇒ So, his selling price should be of the C.P th 1 16 1 So loss is of the S.P = 15 (1875+1875) = Rs. 250 15
Faulty Balance and their Concept Sometimes traders may sell their products at the rate at which they purchased or even less than the actual cost incurred to them. Faulty balance here means that a shopkeeper is measuring wrong volume (less or more) and taking the price of full volume what a customer asked.
Faulty Balance and their Concept Even in this transaction they make profit by cheating on volume. 1. If the weighing balance of a shopkeeper reads 1000 grams for every 900 grams, what is the profit or loss the shopkeeper is making? 2. On the other hand if the faulty balance reads 900 grams for every 1000 grams, is he still making profit? If not why? 3. A cloth merchant measures 80 cm for every 1 m cloth he is selling; and sold at the cost price.
Faulty Balance Example Instead of a meter scale, a cloth merchant uses a 120 cm scale while buying, but uses an 80 cm scale while selling the same cloth. If he offers a discount of 20% on the cash payment, what is his overall profit percentage? Solution When the merchant is buying he is using a scale of 120 cm instead of 100 cm 120 6 thus multiplying factor for him in this transaction = = 100 5 When selling the cloth the merchant is measuring 80 cm for every 100 cm , 100 5 So multiplying factor of this transaction is = = 80 4 80 4 For the discount offered by the merchant the multiplying factor = = 100 5 6 5 4 6 1 Net profit = × × = = 1+ 5 4 5 5 5 Hence making a profit of 20% in the whole transaction.
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