Week 7 – Profit and Loss

Week 8 - Break-even Point

BUSINESS MATH
LEAP – W7 & W8
 OBJECTIVES:
At the end of the lesson, you are expected to:
Wk 7- Profit and Loss
● differentiate profit from a loss;
● solve for the profit; and
● determine if profit or loss is achieved in a given transaction.
Wk 8 - Break-even Point
● determine the break-even point
 Basic Concepts
Most businesses’ goal is to gain profit. Although sometimes due to
unforeseen circumstances and events (e.g. typhoon, wrong business
decision) the business incurred losses.
Selling price is the amount the product is being sold or service rendered.
Sales is the total product sold or service rendered for a given period (e.g.,
daily, weekly, monthly, annually). It can be illustrated in quantity or in
peso.
Cost is the amount paid by the business for the good or service it is
going to sell.
Profit is what remains of the selling price or sales after deducting all the
costs and expenses of the good or service. It is represented in peso terms.
Loss occurred when the sales are less than the cost of goods or services.
SALES

To get the sales, multiply the number of

products sold by the selling price.

Sales = No. of product sold x selling price

PROFIT

To get the profit, simply deduct the cost from

the selling price, as shown below.

Profit(Loss) = Sales – Cost

LOSS

There are instances when the sales are less

than the cost, this is when the business incurred
loss.
The same formula as profit applies but with a
negative outcome.
Determining the profit or loss involves simple
fundamental operations in Mathematics.
ILLUSTRATIVE PROBLEM

A group of ABM students was tasked to

sell cookies during a business simulation. They
sold 20 packs of cookies for Php 60 each pack.
The cost of each pack is Php 45.
1. How much are the total sales of cookies?
2. How much profit did they get per one pack?
3. How much is the total profit?
4. If 10 packs will to be sold, would it be gain or
loss?
Solution

1. How much are the total sales of cookies?

Solution:
Sales = no. of cookies sold x selling price
Sales = 20 packs x Php 60/pack
Sales = Php 1,200
The total sales of 20 packs of cookies is Php
1,200.
Solution
2. How much profit did they get for one pack?
Solution:
Profit = selling price – cost
Profit = Php 60 – Php 45
Profit = Php 15
For every pack of cookies sold, they have a profit of Php 15.
Solution

3. How much is their total profit?

Solution:
Total Profit = profit x no. of packs sold
Profit = Php 15 x 20 packs
Profit = Php 300
The total profit for 20 packs of cookies is Php 300
Solution
4. Suppose they only sold 10 packs, did they gain profit or incurred loss?
Solution:
Sales = 10 packs of cookies x Php 60
Sales = Php 600
Cost = Php 900
Loss = sales – cost
Loss = Php 600 - Php 900
Loss = (Php 300)
As computed, the cost of cookies is greater than its sales, therefore,
there is a loss of Php 300 for selling 10 packs of cookies. In order to gain
profit, you need to sell 16 packs or more.
 Application
Direction: Answer the problems below.
1. Donna bought a bag for Php 1,500. Given the following situation,
(1) determine whether she earns a profit or incurs a loss
(2) determine how much was her profit or loss.
a. Maribel sold the bag to her friend for Php 1,800.
b. Maribel’s sister likes the bag and gives her Php 500 for it.
 Solution:
Checking your understanding. Answer the problems below.
1. Donna bought a bag for Php 1,500. Given the following situation, (1)
determine whether she earns a profit or incurs a loss (2) determine
how much was her profit or loss.
a. Maribel sold the bag to her friend for Php1,800.
Sales Php1,800
Less: Cost 1,500
Profit Php 300
b. Maribel’s sister likes the bag and gives her Php 500 for it.
Sales Php 500
Less: Cost 1,500
Loss (Php 1,000)
 Evaluation:
A. Indicate whether the statement has profit or loss, write P for profit
and L for loss.
__ 1. Ben bought a pen at Php10 and sold it for Php12.
__ 2. Martha bought a scientific calculator at Php2,000 but sold it for
Php1,200 when an upgraded model was released to buy a new one.
__ 3. A vendor sold banana cue for Php10 with a cost of Php13.
__ 4. A personalized calendar with a cost of Php850 was sold for Php575.
__ 5. Joy bought a 16GB memory card for Php650 and sold to her friend
for Php655.
 Evaluation:
B. Solve the following with solution.
1. A motorbike was sold for Php60,000. What is the cost of the motorbike
if the profit is 30%?
2. A jeweler sells a pair of 18-karat earrings at Php20,000. She decided
to offer a 5% discount for a week. The weekly average sales of
earrings increased from 16 to 30 pairs. How much was the weekly
profit increased or decreased by offering a discount if the cost of a
pair of earrings is Php15,000?
3. A mobile phone was sold for Php4,800. Find the cost of the mobile
phone if the profit is 20%.
 Break-even Point

We gain profit when there is excess from the sales after

deducting the cost of the product and there is a loss when the
cost is greater than the sales.
How about when there is no profit and there is also no
loss? We call this the break-even point.
It is a point where a business neither gains profit nor
incurs a loss. This is the point where total revenue is equal to
the total cost.
 Basic Concepts
Revenue is the total income generated by the sale of goods or services of an
entity. It also consists of other income-generating activities such as interest
income from investment.
Fixed cost is a cost that does not change regardless of production output.
It is a cost necessary in running the business. Examples are rent, salaries,
utilities, and others.
Variable cost is the cost incurred in producing each product.

Break-even point analysis is used to determine the number of units or revenue

in peso needed to cover the total costs. To break-even, we assume that,
Revenue = Variable cost + Fixed Cost
Basic Concepts
Break-even point analysis is important because it is
the basis of determining how much a business must
produce to become profitable and to avoid losses. It is
valuable in forecasting and planning all aspects of the
business operation.
The formula for break-even analysis is
𝐵𝑟𝑒𝑎𝑘 − 𝑒𝑣𝑒𝑛 𝑃𝑜𝑖𝑛𝑡 (𝑖𝑛 𝑢𝑛𝑖𝑡𝑠)
= 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 ÷ (𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 −
𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡)
ILLUSTRATIVE EXAMPLE

A manufacturing company’s fixed cost consists

of rent, utilities, and salaries amounting to Php
150,000 a month. The variable cost in producing
one iced tea bottle is Php 13 per unit and sells at
Php 28.
Determine the break-even point.
Php 280,000 = Php 130,000 + Php 150,000
 Solution:
Fixed cost = Php 150,000
Variable cost = Php 13
Selling price = Php 28
BEP (in units) = Php 150,000 / (Php 28 – Php 13)
BEP (in units) = 10,000 units
The manufacturing company needs to sell 10,000 units of bottled iced tea per month to
break-even. To gain profit, they need to produce more than 10,000 units.
How much is the break-even point in peso?
BEP (in Pesos) = Selling price x BEP (in units)
BEP (in Pesos) = Php 28 x 10,000 units
BEP (in Pesos) = Php 280,000
The manufacturing company needs to have a revenue of Php 280,000 to
cover all costs (fixed cost and variable cost) for the month.
Application

Direction: Answer the following word problems.

1. Find the break-even point in units and in peso given that the unit price of
a bracelet is Php 18, variable cost is Php 5, and a total fixed cost of Php
10,000.
2. A company’s variable cost per unit of ballpen is Php10, a total fixed cost
of Php 12,000. If the company sold a total of 5,000 units yielding a total
sale of P120,000, how much is the break-even point in units? In peso?
Solution:
1. Find the break-even point in peso and in units given that the unit price of
a bracelet is Php18, variable cost is Php5, and a total fixed cost of Php10,000,
units produced is 5,000.
BEP in Peso = Php10,000 + (Php5 x 5,000 units)
= Php35,000
BEP in Units = Php10,000 / (Php18 - Php5)
= 769 units
2. A company’s variable cost per unit of ballpen is Php10, a total fixed cost
of Php12,000. If the company sold a total of 5,000 units yielding a total
sale of P120,000, how much is the break-even point in units? In peso?
BEP in Units = Php12,000 / (Php24 - Php10)
= 857 units
BEP in Peso = Php12,000 + (Php10 x 5,000 units)
= Php62,000
 Evaluation:
Directions: Read carefully then solve the following problems. Show your solution.
1. Jayjee runs a coffee shop wherein the monthly fixed cost is ₱40,000. He sells a
cup of coffee for ₱50. The variable cost for each cup is ₱10.
a. What is the break-even quantity?
b. How much profit will he earn if he sells 500 cups? 1500 cups
c. How much cups must be sold to earn a profit of ₱40,000.
2. A store owner sells whole pad paper at ₱20 per pad. The fixed costs is ₱5,000
and the variable cost is ₱10 per pad.
a. How many pad paper the business will sell to earn a profit of ₱2,000? A loss of
₱1,000?
b. How many pad paper will it break-even?
c. Find the break-even point in peso.