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    Computing Profits Lesson

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    MYRRH TRAIN
    Rhea bought 10 boxes of perfume for 120,000 each, containing a dozen bottles each. She plans to sell each bottle for 1,500. To calculate her profit, you take the amount earned from selling all the bottles and subtract the total cost of the 10 boxes. Understanding profit is important for a business to know if it is successful and can allow it to expand, attract investment, and hire more employees. Gross profit is revenue minus the cost of goods sold. Operating profit is gross profit minus operating expenses like rent, salaries, insurance. Net profit is operating profit minus other expenses like interest and taxes.

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    Computing Profits Lesson

    Uploaded by

    MYRRH TRAIN
    413 views22 pages
    Rhea bought 10 boxes of perfume for 120,000 each, containing a dozen bottles each. She plans to sell each bottle for 1,500. To calculate her profit, you take the amount earned from selling all the bottles and subtract the total cost of the 10 boxes. Understanding profit is important for a business to know if it is successful and can allow it to expand, attract investment, and hire more employees. Gross profit is revenue minus the cost of goods sold. Operating profit is gross profit minus operating expenses like rent, salaries, insurance. Net profit is operating profit minus other expenses like interest and taxes.

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    Rhea bought 10 boxes of perfume for 120,000 each, containing a dozen bottles each. She plans to sell each bottle for 1,500. To calculate her profit, you take the amount earned from selling all the bottles and subtract the total cost of the 10 boxes. Understanding profit is important for a business to know if it is successful and can allow it to expand, attract investment, and hire more employees. Gross profit is revenue minus the cost of goods sold. Operating profit is gross profit minus operating expenses like rent, salaries, insurance. Net profit is operating profit minus other expenses like interest and taxes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    413 views22 pages

    Computing Profits Lesson

    Uploaded by

    MYRRH TRAIN
    Rhea bought 10 boxes of perfume for 120,000 each, containing a dozen bottles each. She plans to sell each bottle for 1,500. To calculate her profit, you take the amount earned from selling all the bottles and subtract the total cost of the 10 boxes. Understanding profit is important for a business to know if it is successful and can allow it to expand, attract investment, and hire more employees. Gross profit is revenue minus the cost of goods sold. Operating profit is gross profit minus operating expenses like rent, salaries, insurance. Net profit is operating profit minus other expenses like interest and taxes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 22

    Computation

    of Gross Profits
    Read and understand the problem:
    Rhea is engaged in a buy-and-sell business of
    signature perfumes. She buys 10 boxes of perfumes.
    Each box costs 12,000.00 and contains a dozen of
    perfume bottles. She plans to sell one perfume bottle
    at P1,500. What is her expected profit on the 10
    boxes of perfumes?
    The ultimate goal of any business whether a
    retail or wholesale is to earn a profit.
    Getting the difference between the amount
    of money earned from the selling 10 boxes
    containing a dozen of perfume bottles and
    the cost of those 10 boxes gives the profit.
    Answer the following questions:
    1. How much does Rhea earn profit?
    2. Is it good to engage in a business? Yes or No?
    3. What do you think of Rhea’s business? Is it
    good for a beginner?
    Why is profit
    important?
    It is important for a business to understand how much profit
    they’ve made to give it an idea as to whether the business is
    successful. With so much money going in and out of a
    business, it is not always easy to see whether what a small
    business owner is doing is actually making money.
    By calculating profit, it helps give some clarity.
    If a business is making a profit it can:
    • expand and grow
    • attract more investment
    • employ more staff.
    Gross Profit - is the revenue a business brings in after covering the
    expenses required to make a sale.
    Simply put, gross profit is a business’s total sales, less the cost of
    goods sold.
    157, 000
    The gross profit rate may signal to the entrepreneur that the amount
    of margin on sales is 21.39%. This rate will be used to determine
    whether the amount of gross profit can cover the operating of the
    business. Since the gross profit rate of XYZ Trading is 21.39%, the cost
    ratio to sales will be 78.61%. This information will help the
    entrepreneur in assessing whether the cost is too high or too low. Any
    product with a very high cost will not become competitive in the
    market.
    The gross profit rate will also help the entrepreneur set the selling
    price.
    Operating Profit Margin Rate

    The operating profit margin is the excess of gross profit from operating
    expenses.
    Gross profit xxxxx
    Less: Operating Expenses xxxxx
    Operating profit margin xxxxx
    The operating profit margin is the second level of
    revenue in the income statement. At this stage, not
    only the cost of buying or making the product that has
    been deducted is included but also the operating
    expenses. These are expenses incurred during a
    particular period only, and are not expected to
    provide benefits to any future period. The operating
    expenses are also period costs.
    In case there are no financing charges like interest, expenses, and income tax, the
    amount of the operating profit margin is equal to the net income.
    Net Profit
    Net Sales
    Return of Investment (ROI)
    The Return of investment (ROI) measures the amount of net income
    per peso invested to the business.
    Yearly increase in revenue is assumed at 5%
    Yearly increase in cost is assumed at 5%
    Compute the Gross Profit
    Answer the given problem.
    1. Annie bought one dozen smartphones for P200,000.00 with a
    discount of 5%. She sold half dozen at a price of P18,000.00 per unit.
    However, a new model of smartphone became available in the market,
    so she sold the remaining half dozen @ P12,000.00 each unit. What was
    her profit or loss?
    Compute the following requirements:
    a. Gross profit rate
    b. Operating profit margin rate
    c. Net profit margin rate
    d. Return on Investment
    Fixed Expenses - Fixed costs don’t change based on production.
    Examples of fixed costs include:
    • Rent
    • Insurance
    •Salaries of employees
    • Payroll taxes and employee benefits
    • Property taxes
    Variable Expenses - are costs that can change based on how much you’re producing.
    Examples of variable costs include:
    ●Materials used
    ●Shipping costs
    ●Direct labor
    ●Credit card fees
    ●Sales staff commissions

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