Profit Formula

Profit is the money you make after covering all your costs and expenses. In simple terms, if you sell something for more than it costs you to make or buy, the difference is your profit—it reflects performance, supports growth, and drives long-term success.

For example, you run a lemonade stand. If you spend $50 on lemons and sugar (your costs) and sell all your lemonade for $100 (your revenue), your profit is $100 - $50 = $50.

That $50 is your reward for your effort and risk!

The profit formula is given as:

Where:

• Cost Price (CP) is the original purchase or production cost of the product.
• Selling Price (SP) is the amount at which the product is sold.

Example: If you are selling a product for $120, and it costs you $80 to purchase or produce it.

Solution:

Given that :

• (SP) = $120
• (CP) = $80

Profit = Selling Price − Cost Price
= 120 − 80 = 40
So, the Profit is $40.

How to Calculate Cost Price (CP) and Selling Price (SP)

To Calculate Cost Price (CP)

Cost Price (CP) refers to the original amount paid for a product or the cost incurred to produce or acquire it. It’s essentially the amount you spend to obtain the product before you sell it.

When Selling Price (SP) and Profit are Known:

Cost Price = S.P − Profit

Example: If you sold an item for Rs 150 and made a profit of Rs 50. The Cost Price (CP) would be:

Explanation:

Cost Price = S.P − Profit
Cost Price = 150 - 50
Cost Price = 100

When Selling Price (SP) and Profit Percentage (Profit %) are Known:

Cost Price = 100 × Selling Price​/100 + Profit %

Example: If you know that you made a 20% profit on an item, and the Selling Price is Rs200, you can calculate the Cost Price using the formula:

Explanation:

Cost Price = 100 × Selling Price​/100 + Profit %
Cost Price = 100 × 200​/100 + 20
Cost Price = 20000​/120
Cost Price = 166.67

To Calculate Selling Price (SP)

The Selling Price (SP) is the price at which a product is sold to customers. It includes the Cost Price (CP) and any additional profit you want to earn. The Selling Price is often set to ensure that you cover all costs and make a profit.

When Cost Price (CP) and Profit are Known:

Selling Price = Cost Price + Profit

Example: If you bought a product for Rs80 (Cost Price) and want to make a profit of Rs20. The Selling Price (SP) would be:

Explanation:

Selling Price = Cost Price + Profit
Selling Price = 80 + 20
Selling Price = 100

When Cost Price (CP) and Profit Percentage (Profit %) are Known:

Selling Price = (100 + Profit %) × Cost Price ​/100

Example: If you bought an item for $150 and want to make a 25% profit on it, the Selling Price would be calculated as:

Explanation:

Selling Price = (100 + Profit %) × Cost Price ​/100
Selling Price = 125 × 150/100
Selling Price = 18750/100
Selling Price = 187.5

Formulas to Calculate Profit

The various formulas to calculate Profit are:

• The formula for Profit Percentage is dependent on Profit and C.P.

Profit Percent Formula = (Profit × 100)/ C.P.

• Gross Profit Formula is the profit on the total sales of goods

Gross Profit = Total Revenue – Total Cost of Goods Sold

• Net Profit is the profit that is incurred after excluding all expenses and other costs.

Net Profit = Gross profit - Expenses

Profit Percentage

Profit percentage (%) is the amount of profit represented as a percentage of the total. Because this profit is dependent on the cost price.

Profit percentage = (Profit / Cost price ) × 100

Different Profit Formulas

Some important formulas related to profit are given below:

Solved Questions on Profit Formula

Question 1: A shopkeeper buys pens in bulk for Rs. 20 each. He sells each of them for Rs. 45. What will be the profit and the profit percentage?

Solution: 

Given: Selling price of the Pen (S.P) = Rs. 45
Cost price of the Pen (C.P) = Rs. 20
Now, As per the profit formula,
Profit = Selling Price – Cost Price
So, profit = 45 – 20 
Profit = Rs. 25

Now, Using the formula for profit percentage,
Profit % = (Profit / Cost Price ) × 100
So, the profit percentage = (25 / 20) × 100 
= 1.25 × 100 

Profit percentage = 125%.

Question 2: If a shopkeeper sells fruits at Rs 250 per kg, whose cost price is Rs 150/- per kg. What will be the profit gained by the shopkeeper?

Solution: 

Given, Cost Price = Rs.150/-
Selling Price = Rs.250/-
From the formula of profit, we know,
Profit = Selling Price – Cost Price
Profit = 250 – 150
Profit = 100

Therefore, the shopkeeper earn profit Rs. 100/- .

Question 3: Find the gain percentage if the profit is Rs 100 and the cost price is Rs 150.

Solution: 

As we know, 
The profit percentage formula is 
Profit percentage % = (Profit / Cost Price ) × 100
Since, Profit  = Rs 100 and Cost Price = Rs 150
Therefore, Profit % = (100/150) × 100
Profit % = 10000/150
= 66.66

Hence, the gain percentage is 66.66%.

Question 4: Sanju sold a digital watch for Rs. 6,000, on which he gains 25%. What is the cost price of the digital watch?

Solution: 

For the digital watch Gain = 25%.
Let cost price of watch (C.P.) = Rs.100.
Therefore, selling price (S.P.) of digital watch = (100 + 25) = 125
When selling price (S.P.) is Rs.125, cost price (C.P.) is Rs.100.

Therefore, when selling price (S.P.) is Rs.6000,
Cost price (C.P.) = {100 / (100 + gain )} × 6000
= 100/125 × 6000 
= (100 × 6000)/125
= 600000/125 
= 4800

Therefore, cost price (C.P.) of the digital watch = Rs. 4800.

Question 5: A cost price for the bag is Rs. 350, and the selling price is Rs. 400. Find the profit percentage he earned.

Solution: 

Cost price = Rs 350 
Selling price = Rs 400
Profit = SP – CP
= 400 – 350 
= 50.

Gain% = (Profit / Cost price ) x 100
= (50/350) × 100
= 14.28 %

Question 6: What will be the selling price if the profit is Rs 100 and the cost price is Rs 350?

Solution: 

Let selling price = x 
Given cost price = Rs 350
And profit = Rs 100
Profit = Selling Price (S.P)  – Cost Price (C.P)
100 = x  - 350
or x = 100 + 350
x = 450

So the selling price is Rs 450.

Related Articles:

• Selling Price Formula
• Percent Decrease Formula
• Percentage Increase Formula

Practical Questions

Question 1: If a company sells a product for $150 and the total cost of producing it is $90, what is the profit?

Question 2: A store buys an item for $45 and sells it for $75. What is the profit margin?

Question 3: Calculate the profit if the total revenue is $12,000 and the total cost is $8,500.

Question 4: If a business has a total revenue of $50,000 and expenses of $32,000, what is the profit?

Question 5: Determine the profit if a manufacturer’s revenue is $20,000 and the cost of goods sold is $14,000.

Question 6: A company’s profit is $3,000, and its total revenue is $15,000. What is the profit percentage?

Question 7: What is the profit if a product is sold for $250 and the production cost is $180?

Question 8: A business earns $60,000 in revenue and incurs $45,000 in costs. What is the net profit?

Question 9: Find the profit if the selling price of an item is $400 and the cost price is $320.

Question 10: Calculate the profit percentage if the total revenue from sales is $22,000 and the total cost is $18,000.

Conclusion

The profit formula is a fundamental tool in business and finance used to determine the financial gain from the operations. By calculating the difference between the total revenue and total costs, businesses can assess their profitability and make informed decisions. The formula helps in evaluating the success of business strategies, pricing, and cost management. Understanding and applying the profit formula enables better financial planning and optimization, contributing to a business's long-term success.