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Profit in cost

ACCOUNTANT (Student) (559 Points)

19 February 2020

What is profit in goods costing 60000 if they sell at cost + 20%? Is it 60000*20/100 or 60000*20/120

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4 Replies

rohith kumar (no) (112 Points)
Replied 19 February 2020

20/120

ACCOUNTANT (Student) (559 Points)
Replied 22 February 2020

Why is it 20/120 when it is not given that PROFIT is included in cost given already., I mean it its only 20/100?? kindly explain

Rama chary Rachakonda (Master in Accounts & high court Advocate) (8603 Points)
Replied 22 February 2020

Whenever you get confused do the following. I still use this even after qualifying M.Com.,L.L.B.,M.A.,

20%= 20/100 that's 1/5

Whenever it's on sales and you want to convert into cost, reduce one from the denominator so 1/5 on sales becomes 1/4 which will be on cost. This is a shortcut. Do the vice versa when you want to convert from cost to sale i.e add one in the denominator.

The logic is as follows:-let cost of a product X be 100

Cost + profit= sale price

Now we have to have consider 25%profit on cost. So 100+25%of100= sale price. Which is nothing but 100+25=125.

Now in your question you have 20% on sale

Rs 25 profit on 125 is nothing but 20% on sale

Hence proved 25%on cost=20% on sale!

ACCOUNTANT (Student) (559 Points)
Replied 22 February 2020

thank you sir., understood... but my doubt is they never mentioned it as 20% on sale they only said it as cost +20% which would mean 20/100*cost rather than 20/120*cost... I understood your explaination very well.... thank you sir., but my doubt remained same with respect to the words they used in the question... kindly clarify thank you...