LEARN MATH STEP BY STEP THROUGH VERY EASY PROCESS

CALCULATION OF PROFIT

**CALCULATION OF PROFIT -**

**A shopkeeper buys goods either from a manufacturer or a wholesaler. He then sells these articles to his customers. Usually, a shopkeeper sells an article at a price higher than the price at which he buys it. In such cases, he a makes profit or gain.**

__Cost Price (CP):-__ The money paid by a shopkeeper to buy an article is called the cost price of the article.

__Selling Price:-__ The money received by a shopkeeper on selling an article is called the selling price (SP) of the article.

__Profit or Gain:-__ If (S.P) > (C.P), then the seller makes a gain.

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

**Thus, Sell Price (S.P) = Cost Price (C.P) + (Gain),**

**And, C.P = (S.P) - (Gain)**

**Total Revenue: This includes all the income generated from the sale of goods or services. It can be calculated as:**

**Total Revenue = Quantity Sold × Price Per Unit**

__Total Expenses:-__ These are all the costs incurred in running the business. Expenses can be categorized into different types, such as:

**a. Cost of Goods Sold (COGS):- This includes direct costs associated with producing or purchasing the goods that were sold. It typically includes raw materials, labor, and manufacturing costs.**

**b. Operating Expenses:- These are the ongoing costs of running the business, such as rent, utilities, salaries, marketing expenses, and administrative costs.**

**c. Other Expenses:- These can include interest payments on loans, taxes, depreciation, and other miscellaneous expenses.**

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

**Cost Price (C.P) of an article = Cost of the article + Overhead Expense**

__Note:-__ Profit or Loss is always counted on net C.P

__Gain Per Cent:-__ Gain on $ 100 is called gain percent

** Gain**

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

** C.P**

**Example.1) Let's say a 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 profit.**

**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**

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

**In this example, the business's profit would be $15,000.**

**Example.2) A trader purchase a bicycle for $8250 and sells it for $9240. Find his (i) gain and (ii) gain per cent.**

**Ans.) Cost price (C.P) of the bicycle = $8250, and**

** Sell Price (S.P) = $ 9240**

**Here we can see that, S.P > C.P**

**So, Profit = S.P - C.P = $ (9240 - 8250) = $990 .............(i) (Ans.) **

** Gain**

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

** C.P**

** 990**

** = (------- X 100)% = 12%**

**8250**

**So, the profit is 12% (Ans.)**

**Example.3) A trader bought 15kg of one variety of rice at $60 per kg and 25kg of another variety at $44 per kg. He mixed the two varieties and sold the mixture at $55 per kg. Find the gain or loss per cent in whole transaction.**

**Ans.)**

**C.P of 15kg rice =$(60 X 15) = $900**

**C.P of 25kg rice = $(44 X 25) = $1100**

**C.P of (25 + 15)kg => 40kg mixture = $(900 + 1100) = $2000**

**So, C.P of 40kg rice = $2000**

**He sold 40kg rice by $55 per kg = $(40 X 55) = $2200**

**So, S.P of 40kg rice = $2200**

**So, we can find that, S.P > C.P**

**So, Gain = $(2200 - 2000) = $200 **

**As we know that the formulae of Gain is -**

** Gain**

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

** C.P**

**200**

** = --------- X 100 = 10%**

** 2000**

**So, the percentage of Gain is 10% (Ans.)**

**Remember that profit is just one measure of a business's financial performance. It's important to analyze other financial ratios and factors to get a comprehensive understanding of the business's health and profitability.**