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1.8 G) Profit & Loss
1.8 G) Profit & Loss
A profit is the money that is made after expenses. It occurs when revenue from sales is greater than costs. Costs can be wages, raw materials, business rates etc. A loss occurs when costs are greater than sales.
We can work out overall profit or profit for an individual item. You can use the formula below to work out overall profit.
We can work out overall profit or profit for an individual item. You can use the formula below to work out overall profit.
A positive value is a profit and a negative value is a loss.
Example 1
Sarah buys an old toy car from a thrift shop. She buys it for £8.50 and sells it online for £17.50. What profit or loss did she make?
We use the formula below to work out the profit or loss, where a positive value indicates a profit and a negative value means a loss.
Sarah buys an old toy car from a thrift shop. She buys it for £8.50 and sells it online for £17.50. What profit or loss did she make?
We use the formula below to work out the profit or loss, where a positive value indicates a profit and a negative value means a loss.
The sales are £17.50, and the costs are £8.50.
This is a positive value, which means that Sarah made a profit of £9.
Example 2
A hot dog stand sells 50 hot dogs for £145. Each hot dog costs £3.10 to produce. What was the profit or loss for the hot dog company?
We are going to be using the profit or loss formula again. We are given the total sales (£145) but are not given the total costs. However, we can work out the total costs because we are given the number of hot dogs that they sold (50) and the cost of producing one hot dog (£3.10). Therefore, we find the total cost by multiplying 50 by £3.10.
A hot dog stand sells 50 hot dogs for £145. Each hot dog costs £3.10 to produce. What was the profit or loss for the hot dog company?
We are going to be using the profit or loss formula again. We are given the total sales (£145) but are not given the total costs. However, we can work out the total costs because we are given the number of hot dogs that they sold (50) and the cost of producing one hot dog (£3.10). Therefore, we find the total cost by multiplying 50 by £3.10.
We can now sub the values for sales and costs into the formula below.
This is a negative value, which means that the hot dog stand made a loss of £10.