Determining Selling Price Based on Cost Price and Profit

Understanding the relationship between cost price, selling price, and profit is a fundamental concept in business mathematics. This article will walk you through a practical example to clarify how to calculate selling price using the given difference between cost price and selling price, along with the profit earned.

Key Concepts in Business Mathematics

When dealing with business transactions, it is crucial to understand the following terminologies:

Cost Price (CP): The price at which an item is purchased or the cost incurred to produce an item. Selling Price (SP): The price at which an item is sold to the customer. Profit: The difference between the selling price and the cost price, indicating the financial gain or profit earned.

The relationship between these terms can be represented by the following equations:

Profit: Profit Selling Price (SP) - Cost Price (CP) Solving for Selling Price: Selling Price (SP) Cost Price (CP) Profit

Example Calculation

Suppose that the difference between the cost price and the selling price of an item is given as 240, with a profit of 120. Let's break down the step-by-step process to determine the selling price.

Given Information

Selling Price - Cost Price 240 Profit 120

Step-by-Step Solution

Identify the Variables: CP (Cost Price): Let's denote the cost price as x. SP (Selling Price): From the difference between selling price and cost price, SP CP 240. Profit: The profit is given as 120, so SP CP 120. Equate the Two Expressions for SP: From the equation SP CP 240, we can substitute x for CP. Similarly, from the definition of profit, SP CP 120. Substitute SP from the second equation into the first: Selling Price means SP - 240 Profit Therefore, SP - CP 240 and SP - 120 CP Combine the two equations to solve for CP: SP - 240 120 Calculate the Cost Price: From SP - 240 120, isolate CP: CP SP - 240 120 CP SP - 120 Substitute SP back into the equation to solve for CP: CP 120 120 CP 240 units of base currency Calculate the Selling Price: The selling price can be determined from the cost price and profit: SP CP 120 SP 240 120 SP 360 units of base currency

Therefore, the cost price is 240 units of base currency, and the selling price is 360 units of base currency.

Conclusion

Understanding the relationship between cost price, selling price, and profit is crucial for any business transaction. In this example, we demonstrated how to solve for the selling price when the difference between selling price and cost price is given, along with the profit earned.

Practical Application

This learning can be applied in various business scenarios, such as pricing strategies, calculating break-even points, and determining profit margins. Accurate calculation of selling prices can help businesses make informed decisions and optimize their financial performance.