Profit and loss formulae are used to calculate the profit or loss made by selling a certain product. They are mostly used in commercial and financial operations to show how much profit and loss a trader has made on a given transaction.
The profit and loss formula is a mathematical formula that is used to assess the profitability of a company and the market price of a commodity. Each product has a cost price as well as a selling price. We can determine the profit or loss for a certain product based on the values of these prices. Cost price, fixed, variable, selling price, market price, and so on are some of the key topics discussed here for 6th Grade Math Students. In addition, we will learn the profit and loss % formula here.
Profit and Loss – Definition
The terms profit and loss are used to determine whether a transaction is profitable or not. Before we proceed to the profit and loss calculation, we must first define the terms ‘selling price’ and ‘cost price.’ The cost price refers to the price at which a thing is acquired.
The selling price of a thing is the price at which it is sold. If the selling price is higher than the cost price, the difference is referred to as profit. When the selling price is lower than the cost price, the difference is referred to as a loss.
Terminologies Related to Profit and Loss
We’ve come across the terms profit and loss before. Profit refers to gain, an advantage, or a benefit, whereas loss is the absolute opposite of profit, including expenditure rather than gain.
Cost Price (CP): The cost price (CP) of a product is the amount paid for it. It may also include overhead costs, transportation costs, and so forth. For example, suppose you paid Rs 12,000 for a refrigerator and spent Rs 3000 on shipping and Rs 1000 on installation. As a result, the overall cost price is the sum of all expenditures, which is Rs 16,000.
Selling Price (SP): The selling price (SP) of a product is the price at which it is sold. It might be greater than, equal to, or less than the product’s cost price. For instance, if a shopkeeper purchased a chair for Rs 400 and sold it for Rs 500, the furniture’s cost price is Rs 400, and its selling price is Rs 500.
Profit (P): A profit is made when a product is sold for more than its cost price. If you buy chocolate for Rs 40 and sell it for Rs 50, you’ve made a profit of Rs 10.
Loss (L): A seller makes a loss when a product is sold for less than its cost price. For example, if a laptop costs Rs 30,000 and is sold for Rs 20,000 a year later, the seller will lose Rs 10,000.
Profit Percentage (P%): This is the profit proportion as a percentage of the cost price.
Loss Proportion (L%): This is the percentage of the cost price that has been lost.
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Profit Formula
When a product’s selling price exceeds its cost price, the transaction results in a profit. In other terms, a profit is generated when a thing is sold for a greater price than it was purchased for. The profit formula is derived in this manner. When the selling and cost prices are known, the fundamental profit calculation formula is:
Profit = Selling Price – Cost Price (C.P.)
Let us simplify the topic by using profit and loss math. Assume a shopkeeper buys a pen on the market for Rs 10 and sells it for Rs 15 in his shop.
Solution:
The shopkeeper’s investment or the cost price Equals Rs 10.
The amount paid to the shopkeeper or the selling price Equals Rs 15.
Here, Rs 10 is the cost price.
Rs 15 is the selling price.
Profit is nothing but the difference between the selling price and the cost price.
Profit = Selling Price – Cost Price (C.P.)
Profit = Rs. 15 – Rs. 10
Profit =5 rupees
As a result, by selling a pen, the merchant made a profit of Rs 5.
Loss Formula
Similarly, the loss formula may be determined using the selling and cost prices. In other words, if a thing is sold for less than the amount at which it was purchased, the transaction results in a loss. If the cost price of a product exceeds the selling price, the sale results in a loss.
The fundamental formula for determining the loss when the selling and cost prices are known is: Loss = Cost Price (C.P.) – Selling Price(S.P.)
Let us calculate the loss if a product is purchased at Rs 50 and sold at Rs 30. In this example, the cost price is Rs 50 and the selling price is Rs 30.
Cost Price – Selling Price = Loss
CP = 60 – 40 = 20 is the loss.
As a result, the purchase represents a Rs 20 loss.
Profit and Loss Percentage Formula
The profit or loss is sometimes changed to a percentage after it has been determined. It is a percentage that is used to describe the amount of profit or loss incurred. This is useful for comparing two amounts. The profit and loss percentage formulae are as follows:
- Profit percentage(P%) = (Profit /Cost Price) × 100
- Loss percentage(L%) = (Loss / Cost price) × 100
- S.P. = {(100 + P%)/100} × CP(if SP > CP)
- S.P. = {(100 – L%)/100} × CP(if SP < CP)
- C.P. = {100/(100 + P%)} × SP(if SP > CP)
- C.P. = {100/(100 – L%)} × SP(if SP < CP)
Examples on How to Calculate Profit and Loss from Cost Price and Selling Price?
Example 1. Assume a merchant paid Rs 150 for 1 kilogram of apples. And it was sold for Rs. 160 per kilogram. What is the amount of profit he made?
Solution:
The cost of apples is Rs 150.
The price of apples is Rs 160.
Then the shopkeeper’s profit is; P = SP – CP
P = 160 – 150 = 10 rs.
Example 2.
Larry buys a motorcycle for Rs 7000 and sells it for Rs 6000. Find her gain or loss percentage?
Solution:
Given that the cost of the bike is Rs 5000 and the selling price is Rs 4000,
As a result, loss = Rs 5000 – Rs 4000 = Rs 1000.
Loss percent = (loss/cost price) × 100%
Loss percent = (1000/5000) × 100%
= 20 percent
As a result, the loss percentage is 20%.
Example 3.
A cloth dealer purchased 35 shirts for Rs 280 a piece. He sold them all for Rs. 308. Determine his profit percentage?
Solution:
The profit proportion is the same for one unit as it is for all units. As a result, the calculations should be limited to one unit.
CP = Rs. 280
SP = Rs. 308
Profit = SP – CP
Profit = 308 – 280 = 28 rupees.
You must now apply the profit percentage formula to the case.
Profit percentage(P%) = (Profit /Cost Price) × 100
Profit percentage = 100 (28/280) = 10%
FAQs on Finding Profit or Loss given Cost Price and Selling Price
1. In what ways do profit and loss calculations come into play in our daily lives?
Understanding how loans for cars, vehicles, and houses necessitates a thorough understanding of how EMIs are calculated and how much you must contribute. Calculations are also required in business and when working in any company. Life is always a game of math and a race between profit and loss.
2. What is the formula for determining the selling price?
Selling price = Cost (CP) + desired profit margin (Profit). The revenue indicates the selling price, the cost indicates the cost of goods sold (the expenditures you pay to make or acquire things to sell), and the targeted profit margin is the profit margin you aim to achieve.
3. What is the significance of the selling price?
Because sales and demand for a product are strongly dependent on it, the selling price is a critical issue for both customers and sellers. Any product with a high or excessively high selling price will not attract many consumers since the worth of the product is perceived to be unequal. As a result, the selling price must be properly calculated based on the market analysis and customer needs.
4. How Do I Determine Sales Profit?
Profit is determined by subtracting the total cost of all items from the total selling price of all commodities. To calculate the profit as a percentage, divide the profit by the cost price and multiply by 100. In order to calculate the entire cost price, we must include overheads.