Overhead Charges

The overhead charges become a part of the cost price.

Suppose a person buys some goods from California for $4500 and sells them in New York for $5700; it seems as the person has made a profit = $5700 - $4500 = $1200

So, does he actually gain $1200 on this transaction?

It is not true because the person must have definitely spent some money on:

(i) his travelling from New York to California and then back to New York;

(ii) transportation of the goods bought, etc.

Because of these extra expenses (which is known as overheads), the actual profit made by the person becomes less than $1200. Sometimes, he may even have loss in such a transaction if the overhead expenses exceed $1200.

Cost price (C.P.) = Payment made while purchasing the articles + overhead charges (i.e. extra expenses).

Solved example to calculate overhead charges:

1. Mike buys some electronic goods from a wholesaler for $650 and spends $100 on its transportation's, etc. If he sells these electronic goods for $900; find the profit or loss made by him and express it as percent.

Solution:

Since, the Mike buys electronic goods for $650 and spends $100 on it transportation.

The total cost price of electronic goods for Mike = $650 + $100 = $750

Given, selling price = $900; [which is more than total C.P.]

Therefore, profit = $900 - $750 = $150

Also, profit% = (profit/total cost price) × 100%

= 150/750 × 100%

= 20%

2. A trader at Texas buys a television for $7000 from Florida and sells it in Texas for $7600. If his overhead expenses amount to $1000; find his profit or loss in this transaction and express it as percent.

Solution:

Total C.P. of the television for trader = $7000 + $1000 = $8000

Given, S.P. = $7600; [which is less than total cost price]

Therefore, loss = $8000 - $7600 = $400

Also, loss% = (loss/total C.P.) × 100%

= 400/8000 × 100%

= 5%

● Profit And Loss

To find Profit or Loss when Cost Price and Selling Price are Given

To find Selling Price when Cost Price and Profit or Loss are Given

To find Cost Price when Selling Price and Profit or Loss are Given

Examples on Profit and Loss