Business

Mathematics
BUYING and SELLING

Profit and Loss

Break-even Point
 Profit and Loss
Defined
• Profit - Net Sales > Cost

• Loss - Net Sales < Cost

• Net Sales = Gross Sales - Cost of Sales

• Gross Sales = Total Sales

• Cost of Sales - The purchase price and other expenses

incurred in buying the product that the business has to sell
including the freight-in or transportation of the goods it buys
for resale.

• Operating Expenses - expenses incurred to run the business.

 FORMULA:

profit (loss)
• Profit / (Loss) = Net Sales - Operating Expenses

• Gross Profit = Gross Sales - Cost of Sales

• Gross Profit Rate = Gross Profit / Gross Sales

• Note:

• Total Sales = Total Revenue or Gross Sales

• Gross Profit = Gross Margin or Net Sales

 Formula:

Tabular
PROFIT (LOSS)

Total Sales P100,000 P100,000


Less: Cost of Sales 50,000 60,000

Gross Profit P 50,000 P 40,000

Less: Operating Exp. 45,000 45,000

Profit (Loss) P 5,000 (P 5,000)

 break-even point
defined
• Break-even Point (BEP) - the
point where a business neither
makes a profit nor a loss

• Revenue or Total Sales = Total

Cost

• Total Cost = Variable Costs +

Fixed Costs
 FORMULA:

break-even point

Px = vx +FC

where: P = unit price

x = number of units
v = variable cost per unit
FC = total fixed costs
 Finding the number
of units to break-even
To solve for x:
Px = vx +FC

Px -vx = FC
x(P - v) = FC

x = FC
(P-v)
 Finding the price to
break-even
BEP in Pesos = Unit Price x BEP in Units

or

BEP in Pesos = Unit Price / Unit Margin Ratio

Unit Margin = Revenue per Unit - Variable Cost

per Unit

Unit Margin Ratio = Unit Margin / Revenue per

Unit
 Practice Exercises:

Profit (Loss) # 1
Abigail purchased a suitcase for P1,200.00. She
paid P120.00 for delivery of the suitcase from the
seller to her place. She asked the help of
Bernadette to sell the suitcase. She promised to
give Bernadette P150.00 if Bernadette could sell
the suitcase for at least P1,700.00. Bernadette
was able to sell the suitcase for P1,900.00 to
which Abigail agreed. How much profit did
Abigail get?
 Practice Exercises:

Profit (Loss) # 1
Gross Sales: P 1, 900.00
Less:Cost of Sales
Suitcase 1, 200.00
Freight 120.00 1,320.00
Gross Profit 580.00
Less: Operating Expenses
Commission Expense 150.00
Net Profit P 430.00
 Practice Exercises:

Profit (Loss) # 2
You were given the following data for the Summit
Marketing Co. as of January 31, 2017:

Sales P127,500
Purchases (merchandise) 57,000
Freight In 5,000
Taxes and Licenses 900
Communication Expense 300
Heat, Light, and Water 1,240
Store Supplies Expense 1,180
Office Supplies Expense 730
Miscellaneous Expense 2,090
 Practice Exercises:

Profit (Loss) # 2
A.What is the cost of sale?
B.What is the margin or gross profit?
C.How much is the net profit? What
percent is it of sales?
D.What percent is cost of sale of the total
sales?
E. How much is the gross profit rate?
F. What percent of net profit is it of sales?
 Practice Exercises:

Profit (Loss) # 2
Sales P 127,500

Cost of Sales
Purchases (P 57,000)
Freight in ( 5,000)
Total Cost of Sales ( 62,000) A

Gross Profit P 65,500 B

Operating Expenses
Taxes and Licenses (P 900)
Communication Expense ( 300)
Heat, Light, and Water ( 1,240)
Store Supplies Expense ( 1,180)
Office Supplies Expense ( 730)
Miscellaneous Expense ( 2,090)
Total Operating Expenses ( 6,440)

Profit P 59,060 C
 Practice Exercises:

Profit (Loss) # 2
What percent is cost of sale of the total sales?

= Cost of Sales / Total Sales

= P62,000 / P127,500
= 48.63%

How much is the gross profit rate?

= Gross Profit / Total Sales

= P65,500 / P127,500
= 51.37%

What percent of net profit is it of sales?

= Net Profit / Sales

= P59,060 / P127,500
= 46.32%
 Practice Exercises:

Break-even point # 1
Find the break-even point in units
and in peso given that the unit
price of a certain commodity is
P15.00; variable cost, P5.00; and
fixed cost, P12,000.00.
 Practice Exercises:

Break-even point # 1
BEP in UNITS
x = FC / (P-v)

x = P12,000.00 / (P15.00 - P5.00)

x = P12,000.00 / P10.00

x = 1,200 units
 Practice Exercises:

Break-even point # 1

BEP in PESOS

BEP in Pesos = Unit Price x BEP in Units

BEP in Pesos = P15.00 x 1,200 units

BEP in Pesos = P18,000.00

 Practice Exercises:

Break-even point # 2
A company’s variable cost per unit
is P7.00 and total fixed cost at
P9,000.00. If the company sold a
total of 10,000 units yielding a total
sales of P150,000.00, find the BEP
in units and BEP in pesos.
 Practice Exercises:

Break-even point # 2
BEP in UNITS
x = FC / (P-v)

x = P9,000.00 / ((P150,000 / 10,000 units) - P7.00)

x = P9,000.00 / (P15.00 - P7.00)

x = 9,000.00 / P8.00

x = 1,125 units
 Practice Exercises:

Break-even point # 2

BEP in PESOS

BEP in Pesos = Unit Price x BEP in Units

BEP in Pesos = P15.00 x 1,125units

BEP in Pesos = P16,875.00

individual exerciseS:
1. Alden went to Bicol and bought 25 packs of pili nuts for P875.00 with 10% discount. When he
got back to Manila, he sold 15 packs for P675, and the rest at P40.00 each. How much profit
did Alden gain?
2. A shopkeeper buys digital camera at P5,400.00 each. Due to price fall in the market, he was
forced to sell the at a loss of 15%. Find the selling price of each digital camera
3. Calculate the break-even point in sales units and pesos from the following information: Unit
Price = P20.00, Variable Cost = P8.00, Fixed Cost = P12,000.00
4. A Company’s margin per unit is P16.00 and total fixed cost is P16,000. If the Company sold a
total of 10,000 units yielding a total sales of P250,000, find the BEP in units and BEP in Pesos?
How many units does the company need to sell to receive a profit of P32,000.00?
5. It cost a publishing house P50,000.00 to make books. the P50,000.00 is a fixed cost or a cost
that cannot change. To help the publishing company sell the books, a marketing company
charges P4.00 for each book sold. If the Company charges P9.00 per book, how many books
should they sell to break-even? What is the break-even in pesos?
6. It costs a man P75.00 to buy the things that he needs to make hotdogs. the city allows him to
sell hotdogs somewhere near the city hall. However, the city hall charges him P1.00 for each
hotdog sold. calculate the break-even point in unit and pesos if the price he charges for one
hotdog is P1.50.
7. You run a manufacturing business that is involved in manufacturing and selling a single
product. The annual fixed expenses to run the business are P15,000.00 and variable expenses
are P7.50 per unit. The sale price of your product is P150.00 per unit. What is the break-even
point in units and in pesos?
 individual exercise
# 1:

SALES REVENUE = P675.00 + (10 X 40) = P1,075.00

COST = P875.00 X 90% = 787.50
GAIN: P 287.50
individual exercise
# 2:

SELLING PRICE (SP) = COST x (100% - LOSS%)

SP - P5,400.00 x (100% - 15%)
SP = P4,590.00
individual exercise
# 3:
BEP in Units = FC / (P - vc)
BEP in Units = P12,000.00 / (P20.00 - P8.00)
BEP in Units = 1,000 units

BEP in pesos = P x BEP in Units

BEP in pesos = P20.00 x 1,000 units
BEP in pesos = P20,000.00
individual exercise
# 4:
BEP in Units = FC / Margin per Unit
= P16,000.00 / P16.00
= 1,000 units

BEP in Pesos = FC / Margin per Unit Ratio

= P16,000.00 / (P16.00 / P25.00)
= P16,000.00 / 0.64
= P25,000.00
 individual exercise
# 4:
How many units does the company need to sell to
receive a profit of P32,000.00?

Gross Margin / Margin per Unit

Profit P 32,000.00
Fixed Cost 16,000.00
Gross Margin 48,000.00

= P48,000.00 / P16.00
= 3,000 units
individual exercise
# 5:
BEP in Units = FC / (P - vc)
BEP in Units = P50,000.00 / (P9.00 - P4.00)
BEP in Units = 10,000 units

BEP in pesos = P x BEP in Units

BEP in pesos = P9.00 x 10,000 units
BEP in pesos = P90,000.00
individual exercise
# 6:
BEP in Units = FC / (P - vc)
BEP in Units = P75.00 / (P1.50 - P1.00)
BEP in Units = 150 units

BEP in pesos = P x BEP in Units

BEP in pesos = P1.50 x 150 units
BEP in pesos = P225.00
individual exercise
# 7:
BEP in Units = FC / (P - vc)
BEP in Units = P15.00 / (P15.00 - P7.50)
BEP in Units = 2,000 units

BEP in pesos = P x BEP in Units

BEP in pesos = P15.00 x 2,000 units
BEP in pesos = P30,000.00