BUSINESS MATH: PROFIT AND LOSS

TITLE: BUSINESS MATH: PROFIT AND LOSS

TITLE: BUSINESS MATH: PROFIT AND LOSS

I’m Carla Gatdula, 19 years old from Sta. Rosa Laguna. Currently studying Industrial Design at the University of Santo Tomas for the third year in college, belongs to the section 3IND-2. This is actually the first time that I’d be doing a blog. I often surf the net for fun, but thus blog thing is a first for me. 

On the first day of our class, we had a discussion about Loss and Profit. Where Profit is defined as the amount by which the sales are greater that the cost of goods sold and the operating expenses. Profit can also mean as gain or Margin. In getting the profit, there are formulas to be followed:

• Gross Sales – Refunds and Allowances = NET SALES
• Gross Profit – Operating Expenses = NET PROFIT

For example:

1. National Bookstore has net sales of P 20, 458.00 and the cost of goods sold P 4, 358.00 therefore, how much is the net profit of National Bookstore? The operating expenses account is P 12, 000.00.

Solution:

         P 20, 458.00    net sales

      -    P 4, 358.00    cost of goods

         P 16, 100.00    gross profit

      -  P 12, 000.00    operating expenses

           P 4, 100.00   net profit

What do we mean when we say Gross Sales, Gross Profit, Refunds, Net Sales, Net Profit and Operating Expenses? Gross Sales is the actual amount received for selling the good, Gross Profit is the difference between the net sales and the cost of goods sold, Refunds is defined as the amounts returned, Net Sales are obtained when refunds are being deducted from the gross sales, Net Profit is the amount obtained when all the selling expenses or other cost of doing business are deducted from the gross profit and the Operating Expenses or overhead are selling expenses such as salaries or wages, traveling expenses, rentals, water, electric bills, commissions, taxes.

It is not only getting the net sales and net profits are the ones discussed in the class but also getting the gross profit. How are we going to get the gross profit? Here is an example.

1. The Blackberry Company has sales of P 1, 000, 000.00 for the first eight months of the business. The expenses are the following: Wages and salaries P 353, 163.00, rent to cost of goods amounting to P 333,300.00, light and water bills P 430, 785.00. If there is a refund of P 78, 453.00 for defective phones, compute for net sales, gross profit, and net profit.

Solution:

Gross Sales                                                             P 1, 000, 000.00

Less: Refunds                                                                P 78, 453.00

1. Net Sales                                                               P 921, 547.00

Less: Cost of Goods                                                      P 333, 300.00

1. Gross Profit                                                            P 588, 247.00

Less:  Operating Expenses

Salaries and Wages                               P 353, 163.00

Light and Water                                     P 430, 785.00

Rent                                                     P 333, 300.00

Total Operating Expenses                                          P 1, 117, 248.00

Net Profit                                                                      P 529, 001.00

We have also tackled about the inventory. Inventory is an itemized list of goods on hand. How do we do an inventory? In a company every end of the month inventory is made. For example in a market, the owner or the employee makes a list of the each product, its quantities, its price, how many was the product at the first and how many product was sold at the end of the month, etc. I remember when I walked in at the Ministop, there was this employee who keeps on roaming around the market, counting the products, calculating the expenses and so on. It was an inventory being done.

I have mentioned the refund above. What is a refund? Refund is the amount or money returned whenever you have sold a defective product. When you buy at mall or anywhere, you should always check for the product if it is completely working, the appearance is not damaged meaning no scratches. If so the products you have sold are defective, the consumer has the right to get a refund of what they have paid you for the product. With that case, your money or what you paid for what you consumed will be returned to you. Refund only happens when the product itself is defective. You cannot get a refund if you were the one who got to apply or give damage to the product.

When you are to give price to a certain product, you do not just give what pops on your mind. In pricing your product, you have to compute for your operating expenses.But first, what is operating expenses? It is the way of selling expenses such as salaries or wages, traveling expenses, rentals, water, electric bills, commissions, taxes. You price your product by all the expenses you have had for the product. Example you are planning to create a perfume business. You have a quantity of 300 bottles of perfume at P 1, 000.00 each when you bought it at the main store. You had a total of P 300.00 for your transportation back and forth, and renting a carrier cost you P 200.00. Compute for your buying price this way: 300 bottles of perfume for P 300,000.00 plus P 500.00 for transportation and carrier, you get P 300, 500.00. Your buying price now would be P 3, 005.00.

Studying Business Math would help you find a job, or even make a job of your own. Whatever college course you have taken, if it fails you then business math comes in your way. You do not have to be always present while working. Nowadays since technology and internet are widely used, you can just create your own site and start selling your products online. Are you familiar with sulit.com.ph? It is a buying and selling site where you can just post your blog and pictures of your product. You might be worrying about the payment. It could be done online using credit card or other transactions that can be done online or you can also pay personally so you may also see the product before you purchase it.

Checked by: Prof. Crisencio Paner