Understanding Profit Calculation in Retail Sales: A Practical Example

In the world of retail, correctly calculating profit and selling price (SP) is crucial to maintaining financial health and maximizing profits. This article will walk you through a detailed example to understand how to calculate the selling price and the profit percentage in a practical scenario.

Given Data

Let's consider a trader who purchases an article for Rs 1200. The trader then lists the article 30% above the cost price (C.P.) and sells it after giving a 20% discount on the listed price.

Step-by-Step Solution

Step 1: Calculate the Marked Price (M.P.)

The trader lists the article at 30% above the cost price.

Calculate 30% of the Cost Price (C.P.):

30% text{ of C.P.} frac{30}{100} times 1200 0.30 times 1200 360

Add this to the C.P. to get the M.P.:

M.P. 1200 360 1560

Step 2: Calculate the Selling Price (S.P.)

The article is sold after a 20% discount on the M.P.

Calculate the discount:

20% text{ of M.P.} frac{20}{100} times 1560 0.20 times 1560 312

Subtract the discount from the M.P. to get the S.P.:

S.P. M.P. - text{Discount} 1560 - 312 1248

Step 3: Calculate the Profit

Profit is calculated by subtracting the C.P. from the S.P.

Calculate the profit:

text{Profit} S.P. - C.P. 1248 - 1200 48

Step 4: Calculate the Profit Percentage

Profit percentage is calculated based on the C.P. and not the S.P.

Use the formula left(frac{text{Profit}}{text{C.P.}}right) times 100%:

text{Profit Percentage} left( frac{48}{1200} right) times 100 4%

Summary

Selling Price (S.P.): Rs 1248
Profit Percentage: 4%

Practice with Other Methods

Here are a few alternative methods to verify the solution:

Using a single step for markup and discount:

text{M.P.} 1200 times 1.30 1560
text{S.P.} 1560 times (1 - 0.20) 1248

Directly calculating the net cost and profit:

text{S.P.} 1272.00
text{Profit percentage} 6%

Note: The profit is always calculated based on the selling price unless explicitly stated otherwise. It is incorrect to calculate the profit percentage based on the cost price.

Conclusion

Understanding these key steps and methodologies will help retailers accurately calculate selling price and profit percentage, ensuring they make informed decisions that enhance their financial health.