Selling Price

In the following section, we will define what we mean by the concept of Selling Price and see some solved examples that shall help us to solve the questions of Selling Price. Profit and loss is the branch of basic mathematics which deals with the study of profit and loss made in a business transaction. The profit and loss account is fundamentally a summary of the trading transactions of a business and shows whether it has made a profit or loss during a particular period of account. Indeed, by deducting the total expenditure from total income the profit or loss of a business can be calculated.

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Selling Price

Price can be a sensitive issue. If priced too high, a dish may not sell or customers may complain or not return to the
business as they may feel they have not received value for money. Alternately, if a dish is underpriced and does not
make a profit, the business will be damaged financially and will face problems in the future if it does not rectify the
situation. A method to ensure that a profit margin is achieved is to build a target percentage of gross profit into the selling price.

For example, if the food costs for a dish total £3.00 and a gross profit target is set at 70%, the food costs as a percentage of the selling price can only represent 30%. It is important to note that the selling price is the total amount of money that will be received so this has to represent 100% for the purpose of this calculation. In basic terms, food costs + gross profit = selling price.

Learn more about Marked Price here in detail.

Illustration

To calculate the selling price on this basis, the food costs have to be expressed as a percentage of the selling price using the following calculation. Food cost ÷ Food cost as a % of the selling price × 100
For example, if food costs for a dish come to £4.50 and the gross profit target is 75%, the food cost as a percentage of
the targeted sale is 25%.

To calculate the selling price based on this information:
£4.50/25× 100 = £18.00.

By dividing £4.50 by 25, this brings the figure down to 1% of the selling price (£0.18). By then multiplying by 100, it brings the figure up to 100%, the selling price (£18.00). As long as you have the food cost and the target gross profit percentage, this is sufficient information to calculate the selling price.

Browse more Topics under Profit And Loss

• Cost Price
• Fixed, Variable and Semi-variable Cost
• Marked Price
• List Price
• Margin
• Dishonest Dealers and Faulty Weights
• Percentage Loss
• Percentage Gain
• Discounts and Marked Price
• Equivalent Discount
• Equation-Based Questions
• Goods Passing Through Successive Hands
• True Discount
• Bankers Discount
• Profit and Loss Practice Questions

Determination of The Selling Price

Pricing the product is the most crucial steps. Methods to price your product include:

Cost-based pricing:

• include a profit percentage with product cost.
• add a percentage to an unknown product cost.
• blend of total profit and product cost.

Competition based pricing:

• price is the same as the competition.
• set price to increase customer base.
• seek larger market share through price.

Customer-based pricing

• use price to support product image.
• set price to increase product sales.
• design a price range to attract many consumer groups.
• set price to increase volume sales.
• price a bundle of products to reduce inventory or to excite customers.

Learn more about List Price here in detail.

Important Formulae

Following are the main and important concepts that we shall recall over and over.

Cost Price: The price at which an article is purchased, is called its cost price (C.P.).

Selling Price: Price at which an article is purchased is known as its selling price (S.P.).

Profit or Gain: If SP is greater than CP then the seller is said to have profit or gain.

Loss: If SP is less than CP the seller is said to have incurred Loss.

On the basis of these concepts, we have the following concepts:

A) Gain = SP – CP

B) Loss = CP –SP

C) Loss or gain is always calculated over CP.

D) %Gain = {(Gain*100)/CP}

E) %Loss = {(Loss*100)/CP}

F) SP = {(100 %Gain)/100}*CP

G) SP = {(100-%Loss)/100}*CP

H) CP = {100/(100 %Gain)}*SP

I) CP ={100/(100-%Loss)}*SP

J) If an article is sold at a gain of say, 20%, then SP = 120% of CP.

K) If an article is sold at a loss of say, 20%, then SP = 80% of CP.

Solved Examples For You

Example 1: A person earns 15% on investment but loses 10% on another investment. If the ratio of the two investments be 3:5, what is the gain or loss on the two investments taken together?

A) 0.63%                  B) 0.65%                     C) 0.7%                D) 0.71%

Answer: Suppose he invests 300 & 500 respectively. Then profit can be written as: 15% of 300 = 45. Simlarly, the loss is equal to 500 × 10% = 50. Therefore, the net loss = – 5. Or in terms of percentage, we can write: 5/(500+300)×100 = 0.63 %. Hence the correct option is A) 0.63%.

Example 2: An uneducated retailer marks all his goods at 50% above the cost price and thinking that he will still make 25% profit, offers a discount of 25% on the marked price. What is his actual profit on the sales?

A) 2%               B) 12%            C) 6.3%            D) 12.5%

Answer: Let C.P. = Rs. 100. Then, marked price = Rs. 150. Therefore, S.P. = 75% of Rs. 150 = Rs. 112.50. And hence we can say that Gain% = 12.50%. Hence the correct option is D) 12.5%.

Practice Questions:

Q 1: Even after reducing the marked price of a transistor by Rs. 32, a shopkeeper makes a profit of 15%. If the cost price is Rs.320, what percentage of profit would he have made if he had sold the transistor at the marked price?

A) 12%               B) 16%                C) 22%                D) 25%

Ans: D) 25%.

Q 2: A shopkeeper sells a badminton racket, whose marked price is Rs. 30, at a discount of 15% and gives a shuttlecock costing Rs. 1.50 free with each racket. Even then he makes a profit of 20%. His cost price per racket is:

A) Rs. 20               B) Rs. 24                   C) Rs. 28                   D) Rs. 34

Ans: A) Rs. 20.