Points to Remember:
- Profit is calculated as (Selling Price – Cost Price)
- Loss is calculated as (Cost Price – Selling Price)
- Percentage profit/loss is calculated as [(Profit/Loss)/Cost Price] * 100
Introduction:
This question involves a basic business calculation concerning profit and loss. A shopkeeper’s overall profit or loss is determined by considering the individual profit and loss on each item sold, even if the selling price is the same. Understanding the concept of cost price and its relation to selling price is crucial for solving this problem. We will analyze the scenario to determine the net profit or loss incurred by the shopkeeper.
Body:
1. Calculating the Cost Price of the First Radio (12% Profit):
Let the cost price of the first radio be ‘x’. The shopkeeper earned a 12% profit, and the selling price is â¹1540. Therefore:
x + 0.12x = 1540
1.12x = 1540
x = 1540 / 1.12
x = â¹1375
Therefore, the cost price of the first radio was â¹1375. The profit on this radio was â¹1540 – â¹1375 = â¹165.
2. Calculating the Cost Price of the Second Radio (12% Loss):
Let the cost price of the second radio be ‘y’. The shopkeeper incurred a 12% loss, and the selling price is â¹1540. Therefore:
y – 0.12y = 1540
0.88y = 1540
y = 1540 / 0.88
y = â¹1750
Therefore, the cost price of the second radio was â¹1750. The loss on this radio was â¹1750 – â¹1540 = â¹210.
3. Calculating the Overall Profit or Loss:
Total cost price of both radios = â¹1375 + â¹1750 = â¹3125
Total selling price of both radios = â¹1540 + â¹1540 = â¹3080
Overall Loss = Total Cost Price – Total Selling Price = â¹3125 – â¹3080 = â¹45
Conclusion:
The shopkeeper incurred an overall loss of â¹45. While the selling price of both radios was identical, the differing cost prices resulted in a net loss due to the higher cost price of the radio sold at a loss. This highlights the importance of considering both cost and selling prices when evaluating profitability. To improve profitability, the shopkeeper should focus on better pricing strategies that account for the cost of goods and desired profit margins. A thorough understanding of cost accounting principles is essential for sustainable business practices. This case underscores the need for careful cost analysis and pricing decisions to ensure overall profitability and long-term financial health.