When you purchase something by paying some money or some assets and sell it, definitely you will either be in some profit or loss. Profit and loss are based on price in which you purchased and sold. Cost in which you sold the commodity is called selling cost or selling price and cost in which you purchased is called as cost price.
The 'cost price' is that price which is paid for purchasing some items and the selling price is that price which is charged for items in case of selling them.
Profit and Loss also includes % of total profit or total loss, both profit % and loss % are derived on cost price not on selling price. Let’s Define Profit and Loss in a simple language as:
When cost price is less than that of selling price, then it will be referred to profit. Formally it can be shown as Profit = selling price (s.p.) - cost price (c.p.).
Profit is given by difference of selling price and cost price and when cost price is more than that of selling price then it will result in loss and it can be given as:
Loss = cost price (c.p.) - selling price (s.p.),
Loss is given by difference of cost price and selling price. Lets take an example to understand the concept of profit and loss. Suppose a shopkeeper buys 50 calculators and pays $ 50 for each. If selling price for each of them is $ 55. Then calculate profit or loss.
Solution: Since cost price of each calculator is $ 55, shopkeeper has a profit of $ 5 on each calculator. Profit can be found as
Profit = selling price (s.p.) - cost price (c.p.),
= 55 – 50,
= $ 5.
In Math we may also find the word problems based on the cost price, selling price, profit, loss etc. Cost price of a good is the price at which it is bought and selling price is the price of good at which it is sold. Profit and loss can be calculated in terms of % or price value as follows:
Profit is calculated by subtracting Cost Price (CostP) from the Selling Price (SellP) of the good and Loss is calculated by subtracting Selling Price (SellP) from Cost Price (CostP) of good.
Profit % = ((SellP) – (CostP)) * (100 / (CostP)),
Loss % = ((CostP) – (SellP)) * (100 / (CostP)),
Let us now take an example of it to understand it better:
Q. By selling a good a person loses 15 percent of the sp find his actual loss?
Solution: To find the actual loss we would be using following formula:
(SellP) = (100 – LOSS %) * ((CostP) / 100),
Let selling price of good is $20,000 and according to the question 15 % loss is suffered by the person on selling price of the good. Substituting the values of given quantities in above formula we get value of cost price of good as follows:
20,000 = (100 – 15) * CostP / 100,
Or CostP = (20000 * 100) / 75,
Or CostP = 20000 * 4 / 3 = 80,000 / 3 = $ 27,000 approx.
Total loss suffered by the person can be calculated using the formula:
Loss = CostP – SellP,
Substituting the value of cost price and selling price of the good in the above equation we get:
Loss = $. 27000 - $ 20000 = $ 7000.
Cost price is the price at which an article is bought. All the expenditures that are made over the actual cost are included in the cost price of that article. Profit and loss measurement is generally done in terms of cost price. When articles are traded, the cost at which they are vended is known as the selling price of that article. In maths we may face different types of problems based on evaluating profits and losses using the cost price and selling price of the articles. Let us consider an example of such problems to understand them better:
Example: If selling price 55 and cost price 50 than how much profit in rupees and Percentage?
Solution: According to the question we have been given the cost price equals to 50 and the selling or vending price of article as 55. The profit seems to occur when vending price is more as compared to the cost or actual price of the article and loss prevails in the conditions where the selling price is less as compared to actual (market) price of the article.
Here in our example we are actually gaining profit in selling the good.
Formula for evaluating the profit is given as follows:
Profit (Rupees) = Vending Price – Market Price (Cost Price),
Profit (Percentage) = ((Vending Price – Market Price (Cost Price)) / Cost Price) * 100,
Here, Vending Price = 55 and Cost Price = 50,
Substituting the values of both in the above formula we get:
Profit (Rupees) = 55 – 50 = Rs. 5
Evaluating the equivalent percentage profit:
Profit (%) = 5 / 50 * 100,
Or Profit (%) = 100 / 10 = 10 %,
So, amount of profit earned by the person is 10 % or Rs. 5.