BU YING AND SE LL ING

PROFITS AND
LOSSES
OBJECTIVES
At the end of the lesson, you will learn to

• Differentiate profit from loss

• Illustrate how profit is obtained and how to
avoid loss in a given transaction
• Determine the break-even point
• Solve problems involving buying and selling
PROFIT
It is what rains of the selling
price (sales) after all costs and
expenses had been deducted.
COST
means the cost of the product
sold or service rendered.
EXPENSES
refer to operating expenses
(interest and other finance
charges).
LOSS
It occurs when the cost and
expenses exceed the selling
price or sales.
Determining the profit or loss involves a
simple addition and subtraction. The revenue is a
plus item. All expenses are minus items and,
therefore, deducted from the revenue. The result is a
profit if it is positive and loss if it is negative.
 EXAMPLE
1. A watch store owner decided to offer a 20% discount for a
particular brand of watch which sells at ₱35,000. By doing so, his
average sales increased from 5 watches to 12 watches a day. If he
bought one watch at a price of ₱22,000 from the supplier, by how
much was the daily profit increased or decreased by offering such
discount on the watch?
SOLUTION:

WE COMPUTE FOR THE DAILY PROFIT BEFORE AND AFTER THE

DISCOUNT WAS OFFERED. WITHOUT DISCOUNT,
PROFIT PER WATCH =35,000-22,000= ₱13,000
PROFIT FOR SELLING 5 WATCHES =13,000 ×5=₱65,000
EXAMPLE
1. A watch store owner decided to offer a 20% discount for a
particular brand of watch which sells at ₱35,000. By doing so, his
average sales increased from 5 watches to 12 watches a day. If he
bought one watch at a price of ₱22,000 from the supplier, by how
much was the daily profit increased or decreased by offering such
discount on the watch?

SOLUTION:
WITH 20% DISCOUNT,
NEW SELLING PRICE =35,000-0.2(35,000)= ₱28,000
PROFIT PER WATCH =28,000-22,000= ₱6,000
PROFIT FOR 12 WATCHES 6,000 ×12= ₱72,000
INCREASE IN DAILY PROFIT =72,000-65,000= ₱7,000
Sometimes, a businessman experiences loss because of
mismanagement, unfavorable market conditions, change in
trends for fashionable goods, poor economic situation, unsold
perishable goods, release of new and advanced models for
appliance and electronic gadgets, and a lot more. The examples
below describe such conditions.
 EXAMPLE
2. Annie bought one dozen of smart phones for ₱200,000 with a
discount of 5%. Half dozen were sold at a price of ₱18,000 per unit.
However, a new model of smart phones became available in the
market, so she sold the remaining half dozen at ₱12,000 each unit.
What was her profit or loss?

SOLUTION:

COST OF 12 DOZENS OF SMART PHONES

=200,000-0.05 (200,000)= ₱190.000
 EXAMPLE
2. Annie bought one dozen of smart phones for ₱200,000 with a
discount of 5%. Half dozen were sold at a price of ₱18,000 per unit.
However, a new model of smart phones became available in the
market, so she sold the remaining half dozen at ₱12,000 each unit.
What was her profit or loss?
SOLUTION:
NET SALES:
FOR 6 SMART PHONES AT A PRICE OF ₱18,000 PER PIECE
=18,000 ×6= ₱108,000
FOR 6 REMAINING PHONES AT A PRICE OF ₱12,000 PER PIECE
=12,000 ×6= ₱72,000
TOTAL NET SALES =108,000+72,000=₱180,000
 EXAMPLE
2. Annie bought one dozen of smart phones for ₱200,000 with a
discount of 5%. Half dozen were sold at a price of ₱18,000 per unit.
However, a new model of smart phones became available in the
market, so she sold the remaining half dozen at ₱12,000 each unit.
What was her profit or loss?
SOLUTION:

LOSS ="COST – NET SALES = 190,000 – 180,000 = " ₱10,000

 EXAMPLE
3. Jay-R bought two digital cameras at 15,490 each. He sold one of
the cameras to his friend at 13,500, while the other one was sold to
his neighbor at 16,200. How muchis Jay-R’s profit or
loss?

SOLUTION:

COST OF 2 DIGITAL CAMERAS =15,490 × 2= ₱30,980

NET SALES =13,500+16,200= ₱29,700

LOSS ="COST – NET SALES = 30,980 – 29,700 = " ₱1,280

 EXAMPLE
4. Michelle went to Baguio and bought 20 jars of strawberry jam for
₱3,500 with 15% discount. When she got back to Manila, she sold 10
of the jams for a total of ₱1,800, and the rest at ₱185 each. How
much profit did Michelle gain?

SOLUTION:
COST OF THE 20 JARS OF STRAWBERRY JAM =3,500- 0.15(3,500)=
₱2,975
NET SALES:
FIRST 10 JARS = ₱1,800
REMAINING 10 JARS =185 ×10= ₱1,850
TOTAL NET SALES = ₱3,650
Sometimes when an item is given a
selling price where the profit ends
up being zero, this is said to be the
BREAK-EVEN PRICE. In this case,
the selling price is simply equal to
the total cost price and the
operating expenses
BREAK-EVEN PRICE = COST PRICE + OPERATING
COST
BEP = C + E
WHERE BEP = BREAK-EVEN PRICE
C = COST PRICE
E = OPERATING EXPENSES