Understanding Profit Calculation in Business Transactions: A Case Study
Profit calculation is a crucial aspect of business management. It helps determine the financial health of a business and enables the entrepreneur to make informed decisions. Here, we will solve a real-world problem involving the sale of two articles to understand profit calculation better. Let's delve into the case study.
Case Study: Selling Two Articles with Different Profit Percentages
A man bought two articles for ?3,000 each. He sold one article at a 10% profit and the other at a 5% profit. We need to calculate the total percentage profit he earned.
Initial Costs
The cost price (CP) of each article is ?3,000. Hence, the total cost price (CP) for both articles is ?6,000.
Selling Prices
Let's calculate the selling price (SP) of each article:
First article (10% profit):SP ?3,000 (10% of ?3,000) ?3,000 ?300 ?3,300 Second article (5% profit):
SP ?3,000 (5% of ?3,000) ?3,000 ?150 ?3,150
The total selling price (SP) is ?3,300 ?3,150 ?6,450.
Total Cost Price and Total Selling Price
Given:
Total CP ?6,000 Total SP ?6,450Net profit Total SP - Total CP ?6,450 - ?6,000 ?450
Percentage Profit
Percentage profit (P%) can be calculated using the formula:
P% Net Profit × 100 / Total Cost Price
Substituting the values:
P% (?450 × 100) / ?6,000 45000 / 6000 7.5%
Shortcut Calculation
Another way to calculate the percentage profit is:
P% (Net Profit / Total CP) × 100
P% (?450 / ?6000) × 100 7.5%
Final Answer
The total percentage profit he earned is 7.5%.
Conclusion
This case study illustrates the importance of accurate profit calculation in business transactions. Understanding and applying the correct formulas can help entrepreneurs make informed decisions and manage their businesses more effectively. If you have any similar questions or need further assistance, feel free to ask.