To determine the selling price of goods produced it is essential to add profit to the cost of saleable goods.
Following points should be considered while computing profit:
1. If Percentage of Profit is given on cost then amount of profit will be calculated as follows:
It is further assumed that 10% profit has to be earned, then-
ADVERTISEMENTS:
Profit= (1,25,000 × 10)/100 = Rs 12,500
∴ Selling Price = Cost of Production + Profit
= Rs. 1,25,000 + 12,500
ADVERTISEMENTS:
= Rs. 1,37,500
2. Calculation of Profit on Selling Price:
When cost price is given and a certain percentage of profit on selling price has to be calculated, then following formula will be adopted –
On the basis of above information profit will be calculated as follows:
Selling Price = Rs. 1,25,000 + Rs. 13,889 = Rs. 1,38,889
The above formula can also be explained alternatively:
3. Profit on Sale Price when Sale Price is Given:
4. Profit on Cost Price when Sale Price is Given:
