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CALCULATION OF LOSS

__CALCULATION OF LOSS -__

**Loss is the negative difference between total expenses and total revenue.**

**The formula for calculating loss is:**

** Loss = Total Expenses - Total Revenue**

** LOSS = Cost Price (C.P) - Sell Price (S.P) [when, CP > SP]**

**Thus, Sell Price (S.P) = Cost Price (CP) - Loss**

**and, Cost Price (C.P) = Sell Price (S.P) + Loss**

** Net C.P of an article = Cost of the article + overhead expense**

**An Important Note - **

**Profit or Loss is always counted on net C.P.**

__Loss Per Cent:-__ Loss on $100 is called loss per cent.

**Important Formulae :-**

** Loss**

** Loss% = (--------- X 100)%**

** C.P**

**Here's how to break down the components:**

**Total Expenses: This includes all costs and expenditures incurred by the business. As mentioned earlier, expenses can be categorized into various types such as cost of goods sold (COGS), operating expenses, interest payments, taxes, and more.****Total Revenue: This is the total income generated from sales of goods or services. It's calculated similarly to the revenue calculation in the profit calculation:- Total Revenue = Quantity Sold × Price Per Unit**

**Once you have the values for Total Expenses and Total Revenue, you can use the formula to calculate the loss.**

**Example.1) The business sold 1,000 units of a product at a price of $50 per unit. The cost to produce each unit (COGS) was $25, and the operating expenses amounted to $10,000. Find the loss.**

**Ans.)**

**Total Revenue = 1,000 units × $50 per unit = $50,000
**

**Total COGS = 1,000 units × $25 per unit = $25,000**

**Total Expenses = COGS + Operating Expenses = $25,000 + $10,000 = $35,000**

**Loss = Total Expenses - Total Revenue = $35,000 - $50,000 = -$15,000**

**In this example, the business would have a loss of $15,000. (Ans.)**

**Example.2) A dealer sells a fridge for $2530, thus loosing $220. Find (i) its cost price and (ii) loss per cent.**

**Ans.) S.P of the fridge = $2530, Loss = $220**

**So, Loss = Cost Price (C.P) - Sell Price (S.P)**

**Or, Cost Price (C.P) = Loss + Sell Price (S.P)**

** = $220 + $2530 = $2750 ..........(i) (Ans.)**

**Now, C.P = $2750, and Loss = $220**

**Loss**

** Loss% = (-------- X 100)%**

**C.P**

** 220**

** = (--------- X 100)% = 8%**

** 2750**

**So, percentage of loss is 8%. .............(ii) (Ans.)**

**It's important to note that a negative result indicates a loss, and a positive result indicates a profit. While a loss might not be desirable for a business, it's a crucial metric to monitor as it helps you assess the financial health of the business and make informed decisions about potential adjustments to your operations, costs, and pricing strategies.**