CLASS-6
CALCULATION OF LOSS

CALCULATION OF LOSS -

Loss is the negative difference between total expenses and total revenue.

The formula for calculating loss is:

                   Loss = Total Expenses - Total Revenue

      LOSS = Cost Price (C.P) - Sell Price (S.P)   [when, CP > SP]

Thus, Sell Price (S.P) = Cost Price (CP) - Loss

and, Cost Price (C.P) = Sell Price (S.P) + Loss

     Net C.P of an article = Cost of the article + overhead expense

An Important Note - 

Profit or Loss is always counted on net C.P.

Loss Per Cent:- Loss on $100 is called loss per cent.

Important Formulae :-

                    Loss

      Loss% = (--------- X 100)%

                    C.P

Here's how to break down the components:

1. Total Expenses: This includes all costs and expenditures incurred by the business. As mentioned earlier, expenses can be categorized into various types such as cost of goods sold (COGS), operating expenses, interest payments, taxes, and more.
2. Total Revenue: This is the total income generated from sales of goods or services. It's calculated similarly to the revenue calculation in the profit calculation:- Total Revenue = Quantity Sold × Price Per Unit

Once you have the values for Total Expenses and Total Revenue, you can use the formula to calculate the loss.

Example.1) The business sold 1,000 units of a product at a price of $50 per unit. The cost to produce each unit (COGS) was $25, and the operating expenses amounted to $10,000. Find the loss.

Ans.)

Total Revenue = 1,000 units × $50 per unit = $50,000

Total COGS = 1,000 units × $25 per unit = $25,000

Total Expenses = COGS + Operating Expenses = $25,000 + $10,000 = $35,000

Loss = Total Expenses - Total Revenue = $35,000 - $50,000 = -$15,000

In this example, the business would have a loss of $15,000.     (Ans.)

Example.2) A dealer sells a fridge for $2530, thus loosing $220. Find (i) its cost price and (ii) loss per cent.

Ans.) S.P of the fridge = $2530, Loss = $220

So, Loss = Cost Price (C.P) - Sell Price (S.P)

Or, Cost Price (C.P) = Loss + Sell Price (S.P)

                      = $220 + $2530 = $2750 ..........(i)   (Ans.)

Now, C.P = $2750, and Loss = $220

                                      Loss

            Loss% = (-------- X 100)%

                                       C.P

                           220

                   =  (--------- X 100)% = 8%

                          2750

So, percentage of loss is 8%. .............(ii)        (Ans.)

It's important to note that a negative result indicates a loss, and a positive result indicates a profit. While a loss might not be desirable for a business, it's a crucial metric to monitor as it helps you assess the financial health of the business and make informed decisions about potential adjustments to your operations, costs, and pricing strategies.