Profit and Loss
Every businessman wants to make a profit, and as large a profit as possible. This means selling your wares at a higher cost thean your bought them for, plus whatever costs have been incurred. Making a profit is not always possible though. Sometimes it is necessary to view your expenses as done deals, and your purpose then is to maximise your revenue from the goods you have to sell.
Example: A market trader sells potatoes. One day he buys 500 kg of potatoes in 25 kg bags at £8 per bag from the wholesaler, to be bagged into 5 kg bags and sold at £2.50 each.
Unfortunately, none of the bags can be weighed at eactly 5kg, and in order to avoid giving the customer less than 5 kg of potatoes, he always gives them slightly over. This means he only manages to get 95 5 kg bags.
When he goes to the market and starts selling, he only manages to sell 80 bags at the advertised price of £2.50, and it being the day before his annual holiday, he reduces the price of the remaining bags to £1.50 in an attempt to sell the remaining bags before the end of the day – and avoid the possibility that they might be unsaleable after the holiday.
Find his profit, and his percentage profit.
Each 25 kg bag costs £8 so the 500 kg of potatoes costs 20 times £8 = £160.
He sells 80 bags at £2.50 each so his revenue from these is 80 times £2.50 = £200.
The remaining 15 bags sell for £1.50 so his revenue from these bags is 15 times £1.50 = £22.50
His total revenue is £200 + £22.50=£222.50
His total costs are £160
His profit is £222.50 - £160=£62.50
His percentage profit is