- The profit percentage formula is Profit Percent equals Profit divided by Cost Price times 100, where profit is Selling Price minus Cost Price
- Both profit and loss percentages are always calculated on the cost price, while discount is calculated on the marked price
- These definitions match the NCERT Class 8 Comparing Quantities chapter.
Suppose you go to a shopping complex to buy a shirt. You finally like one shirt and go to look at its price tag, and on seeing it you are a little shell shocked. The price written on the price tag is 2500 rupees. You go to the owner of the complex and ask him for a good discount, and after a bit of chit-chat he agrees to give you a discount of 20 percent. Now calculate the exact amount you need to pay for the shirt.
If your calculation gives you an answer of 2000 rupees, then you are absolutely correct. You pay the sum after subtracting 20 percent of the amount written on the price tag, which is 500 out of 2500. This small example introduces the concepts of marked price and discount. The valuable key point is that the discount is calculated only on the marked price.
Profit and Loss FormulaRead →What Is the Profit Percentage Formula?
The profit percentage formula is Profit Percent equals Profit divided by Cost Price, multiplied by 100. Here profit is Selling Price minus Cost Price. The percentage is always worked out on the cost price. For instance, a shirt bought for 1600 rupees and sold for 2000 rupees earns a 25 percent profit.
The basic formula used to calculate profit percentage is: Profit Percent = (Profit / Cost Price) × 100.
Now assume the shopkeeper who sold you the shirt had himself bought it for 1600 rupees. The question is how much the shopkeeper earned from this sale. He invested 1600 rupees and sold the shirt for 2000 rupees, giving him a profit of 2000 minus 1600, which is 400 rupees. His profit percentage is therefore 100 times 400 divided by 1600, which is 25 percent.
| Quantity (2026 Worked Example) | Value |
|---|---|
| Cost Price (CP) | Rs 1600 |
| Selling Price (SP) | Rs 2000 |
| Profit (SP − CP) | Rs 400 |
| Profit Percent = (400 / 1600) × 100 | 25% |
How Do Cost Price, Selling Price, and Marked Price Differ?
Cost price is the amount a seller pays to acquire a product, including transport and taxes. Selling price is the amount finally received from the buyer. Marked price is the tag price printed before any discount. Profit arises when selling price is higher than cost price, while a discount reduces only the marked price.
- Cost price: the basic price paid to acquire a product initially. Any expenses related to taxes, transport, and overheads are included in it.
- Selling price: the final amount of money received, that is, the price at which the product is finally sold.
- Marked price: the price that is marked or printed on the product before any discount is applied.
- Profit: the difference between the selling price and the cost price when the selling price is higher.
After this example, the concepts of cost price and profit become clear. The price you put in front of the seller to buy something is called its cost price, and the difference between the price at which the seller buys the commodity and the price at which he sells it to you is called profit. Profit percentage is calculated on the cost price. Problems on profit and loss are essential for almost every competitive exam.
CGPA to Percentage ConversionRead →Why Is Profit Percentage Always Calculated on the Cost Price?
Profit percentage is calculated on the cost price because the cost price is the money the seller actually invested. Measuring gain against that investment shows the true return. Using the selling or marked price would understate the real rate of profit, so exams and the NCERT curriculum both fix the base as cost price.
How Does a Discount Change the Amount You Pay?
A discount is a reduction on the marked price, so you pay marked price minus discount. If a shirt is marked at 2500 rupees and the shopkeeper allows 20 percent off, the discount is 500 rupees and you pay 2000 rupees. Discount percentage is always figured on the marked price, not the cost price.
Keeping these two bases separate is the trick most students miss: discount rides on the marked price, while profit and loss ride on the cost price. Once you fix the correct base, the profit percentage formula gives a quick and reliable answer for any buying and selling problem you meet in aptitude tests.