(7)Bussiness Math_ Grade 11_Pricing and _Profit_and_Loss.pptx

(7)Bussiness Math_ Grade 11_Pricing and _Profit_and_Loss.pptx

1. Profit or loss PRICING

2. Lesson Objectives At the end of this lesson, the students should be able to: define cost, initial markup or mark-on, additional markup, markup cancellation, and markdown; differentiate markup and margin; compute for markup based on cost; compute for markup based on selling price; and convert markup based on cost to markup based on selling price and vice versa.

3. Lesson Objectives At the end of this lesson, the students should be able to: differentiate profit from loss; illustrate how to compute for profit and loss; prepare a simple income statement for a trading firm; define break-even; and compute for break-even point.

4. Definition of Terms Cost – purchase price of an article Initial markup – amount added to cost to arrive at the original selling price Additional markup – amounts added to original selling price to arrive at a new selling rice Markup cancellation – decrease in new selling price that doesn’t decrease it below the original selling price Markdown – reduction in the original selling price

5. Markup and Margin Margin – sales minus the cost of goods sold (markup based on sales) Markup – amount by which the cost of a product is increased in order to derive the selling price (markup based on cost) the margin is addressing the profit as it relates to selling price; the markup addresses the profit as it relates to cost price.

6. Markup Based on Cost Sales selling price ₱450 Cost of goods sold (Cost) ₱300 100% Gross profit (Markup) ₱150 Selling price as % of cost Markup as % of cost   150% 50% R =  

7. Markup Based on Selling Price Sales selling price ₱450 100% Cost ₱300 Markup ₱150 Cost as % of selling price Markup as % of selling price   R =   66.67% 33.33%

8. Converting Markup Based on Cost to Markup Based on Selling Price and Vice Versa (Rate based on:) Cost Selling Price Sales selling price 150% 100% Cost 100% Markup 50% The cost rate   33.33% 66.67%

9. Converting Markup Based on Cost to Markup Based on Selling Price and Vice Versa (Rate based on:) Cost Selling Price Sales selling price 150% 100% Cost 100% 66.67% Markup 33.33%   50%

10. Markdown If an item selling for ₱450 is marked to sell at ₱400, the markdown is the difference between the original or and the new selling price Markdown = Old selling price – New selling price = ₱450 – ₱400 = ₱50

11. Markdown The markdown rate is generally expressed as a percent of the new reduced price; hence, the new reduced price is the base: Old selling price ₱450 112.5% New reduced selling price ₱400 100% Markdown ₱ 50 Markdown rate   12.5%

12. Markdown The markdown rate can also be expressed as a percent of the old selling price; hence, the old selling price is the base: Old selling price ₱450 100% New reduced selling price ₱400 88.89% Markdown ₱ 50 Markdown rate   11.11%

13. Income Statement for a Trading Firm Income statement – financial statement showing results of operation Gross sales – total sales Sales discount, sales returns and allowances are deducted from gross sales to arrive at the net sales Cost of goods sold or cost of sales – how much the seller buys the item is the cost of the item

14. Income Statement for a Trading Firm Operating expenses – expenses incurred to run the business Other income – interest income and other incidental income the firm earns like rent income Other expense – interest expense or finance charges financial institutions charge firms for their services Operating profit/loss – gross profit less operating expenses Net profit/loss – operating profit plus other income less other expense

15. Break-even Point Sales = Variable Costs + Fixed Costs If we let x represent the number of units to break-even: Px = vx + FC where P – unit price x – number of units v – variable cost per unit FC – total fixed cost The break-even point in number of units would be: BEP in Pesos = Unit Price BEP in Units  

16. Break-even Point Calculate the break-even point in sales units and sales dollars from the following information: Unit price ₱20 Variable cost ₱8 Fixed costs ₱12,000 BEP in Pesos = Unit Price x BEP in Units  

17. Q uiz 7: Answer the following: Complete the table: 5 . Find the break-even point (in units and in pesos) of a commodity given a unit price of ₱25, variable cost of ₱5, and total fixed cost of ₱11,500. Selling Price Cost Markup % 1. ₱500 ₱120 2. ₱400 ₱45 3. ₱500 70% 4. ₱1,000 45% Selling Price Cost Markup 1. ₱500 ₱120 2. ₱400 ₱45 3. ₱500 70% 4. ₱1,000 45%