11

Business
Mathematics
Quarter 1 – Module 7:
PROFIT AND LOSS
Profit and Loss
Business Mathematics – Grade 11
Self-Learning Module (SLM)
Quarter 1 – Module 7: Profit and Loss
First Edition, 2020

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Introductory Message

This Self-Learning Module (SLM) is prepared so that you, our dear learners,
can continue your studies and learn while at home. Activities, questions,
directions, exercises, and discussions are carefully stated for you to
understand each lesson.

Each SLM is composed of different parts. Each part shall guide you step-by-
step as you discover and understand the lesson prepared for you.

Pre-test are provided to measure your prior knowledge on lessons in each

SLM. This will tell you if you need to proceed on completing this module, or if
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If you have any questions in using this SLM or any difficulty in answering the
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Thank you.
 What I Need to Know

Hello! In your previous lessons, you have learned how to set up the selling
price of a product or service by considering its cost, overhead expenses and desired
mark up. This time, you will learn how to compute profit or loss in business. As
you begin this module, try to think of yourself as the owner of a business to have a
better understanding of what will be discussed in this module.

In this module, you will be able to:

 differentiate profit from loss; and
ABM_BM11BS-Ii-6
 illustrate how profit is obtained and how to avoid loss in a given
transaction.
ABM_BM11BS-Ii-7

Specifically, you are expected to:

1. differentiate profit from loss;
2. solve for the profit given the cost and net sales; and
3. determine if the profit or loss is achieved in a given transaction.

What I Know

Before you begin with this module, grab your pen and answer this test to find
out what you already know about this lesson.

Direction: Read each question carefully and encircle the letter of your answer.

1. Which of the following is the result when the net sales of goods is less than
its cost?
a. break-even
b. cost
c. loss
d. profit

2. What is the result when the net sales of goods is more than its cost?
a. break-even
b. cost
c. loss
d. profit
 3. Which of the following is the result when the net sales of goods is equal to
the cost that was incurred in business?
a. break-even
b. cost
c. loss
d. profit

4. What is the term used to refer to the amount of money received from the sale
of goods after all deductions such as discounts or refunds are made?
a. cost
b. loss
c. net sales
d. profit

5. What is the difference between the capital invested in a business and the
amount received in return?
a. cost
b. loss
c. net sales
d. profit

For items 6-10, read and analyze the problem and answer the questions that
follow.

Mario’s Dressed Chicken Store

Mario sells dressed chicken in his village. He buys his supply of chicken from
a distributor at ₱ 140.00 per kilo. He charges a 25% mark-up based on cost to set
up his selling price. Mario rents a small store space for ₱2,000 a month. He also
incurs monthly water and electricity expenses for ₱ 2,500 and salary of his store
clerk for ₱ 3,000. During a month of operation, he was able to sell a total of 1,000
kilos of dressed chicken.

6. How much is the total variable cost incurred for the month?
a. ₱ 7,500
b. ₱ 14,000
c. ₱ 140,000
d. ₱ 147,500

7. How much is the total fixed cost incurred for the month?
a. ₱ 7,500
b. ₱ 14,000
c. ₱ 140,000
d. ₱ 147,500
 8. What is the selling price of the dressed chicken per kilo?
a. ₱ 35
b. ₱ 140
c. ₱ 165
d. ₱ 175

9. How much is the net sales during the month?

a. ₱ 7,500
b. ₱ 17,500
c. ₱ 75,000
d. ₱ 175,000

10. What is the result of Mario’s business for the month?

a. loss of ₱ 27,500
b. profit of ₱ 27,500
c. neither profit nor loss of ₱ 27,500
d. none of these

Lesson

7 Profit and Loss

An entrepreneur who engages in business thinks of it as means of livelihood.

Therefore, the primary concern is always how it will gain profit from its operation
and avoid loss. In this lesson, you are expected to apply your previous knowledge
about mark up, mark down and trade discounts in solving case problems.

What’s In

As you begin this module, recall first your previous learning about trade
discount.

Problem: How much will be the net price and the trade discount availed by a
customer who purchases a dozen of frozen products at a unit price of ₱50.00 with
a discount rate of 5%?
Solution:
To compute for the trade discount, recall that the formula to be used is:

𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑃𝑟𝑖𝑐𝑒 𝑥 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒

To replace the values given where ₱50.00 is the original price and 5% is the
discount rate, you have:

Trade discount = ₱50.00 x 0.05

Trade discount = ₱2.50

Therefore, the net price of the frozen product is

Net Price = Original Price – Trade Discount

= ₱50.00 - ₱2.50
Net price = ₱47.50

Since the customer has to buy 1 dozen of frozen products to avail of the trade
discount, total trade discount he availed for this transaction is

₱2.50 x 12 frozen products = ₱30.00

What’s New

I hope that you now remembered your lesson about trade discount. You may
now proceed to the next activity!

Activity 1: Word Hunt!

Direction: Encircle all the words related to business that you can find in the box
below. The words can be found horizontally, vertically, diagonally, or
backward. Have fun!

X C V N B O R S N M F
T S O C Q Z E G H V I
I C B N R L B L K Q X
F P B V A R I A B L E
O T S S Y S S A D B D
R G T H V S L O S S W
P E E T Y O H K M P Q
N A R N I L R D F G A
 What is It

Were you able to find all the words in the word hunt activity? I hope you find
the activity a trigger to your interest in the lesson. Now let us define the words that
you found in the word hunt exercise. You start with this lesson by looking at the
three situations that are possible to happen in business. Analyze the cases below.

Case 1 Case 2 Case 3

Net Sales ₱ 1,000 Net Sales ₱ 1,000 Net Sales ₱ 1,000

Less: Cost 500 Less: Cost 1, 200 Less: Cost 1,000
Profit ₱ 500 Loss (₱ 200) Break-even ₱ 0

The first case is profit situation, because the net sales of goods is more than
the costs spent in the business. The second case is loss situation, because the net
sales of goods is less than the cost spent. And the third case is break-even
situation, because the net sales of goods is equal to the cost that was incurred in
business.
Now, what do we mean by net sales? It is the amount collected from the sale
of goods after deductions such as discounts or refunds are made. Example, when
you sold ₱1,000 worth of goods, and one customer returned ₱100 worth of goods
because of defects and another customer availed of ₱50 discount, the net sales
from this sale is ₱850. If no discount or returns were made, the amount collected
from the sale is also considered as net sales.

Inside the box is a simple income statement format that will help you
determine whether a profit or a loss situation happen in a business cycle.

Net sales ₱ xxxxx

Less: Variable Costs xxx
Gross Profit ₱ xxxx
Less: Fixed Costs xxxx
Net Profit (Loss) ₱ xxxx
========

The format above shows how variable costs is deducted from net sales first to
arrive at gross profit (contribution margin). Then, fixed costs is deducted from the
gross profit to arrive at the net profit or loss for the period.
 Variable costs refer to the amount paid for raw materials or ingredients
needed to produce a product or a cost of a product intended for resale. There are
other expenses that you might incur in operating your business like rent for your
space, salary of your worker, insurance fees, interest payments for a loan, office
and store supplies and etc. These expenses are called fixed costs.

Let us now use the case problem below to discover how the simple income
statement format can help you discover how to compute and determine profit or
loss in a business cycle.

Rice for Sale

Susan sells sacks of rice with free delivery to her customers. She buys
her supply of rice from a rice trader at ₱ 2,000.00 per sack. She sells it to her
customers at a price with 20% mark-up based on cost. Susan rents a store
space (inclusive of water and light) near the public market for ₱5,000 a
month. During a month of operation, she also incurs gasoline expenses of
₱2,000.00 and pays wages of ₱3,000 to her driver. How much is the profit or
loss if during the month Susan was able to sell 50 sacks of rice?

Shown in the table are the steps to guide you solve the case problem.

Steps Solution
Variable cost per sack of rice = ₱ 2,000
1. Identify and label all the
Fixed Costs of Business = ₱ 5,000 ( rent ),
information needed to
₱2,000 (gasoline),
solve the problem.
₱ 3,000 (wages)

2. Compute the selling price Mark-up = cost x desired mark-up rate

of the product. Recall = ₱ 2,000 x 0.20
previous lesson about Mark-up = ₱ 400
mark up. In this problem, Selling Price = cost + mark-up
a mark-up of 20% is = ₱2,000 + ₱400
desired based on cost. Selling Price = ₱2,400

3. Compute the net sales by Net Sales = Quantity sold x Selling Price
multiplying the quantity = 50 x ₱ 2,400
sold by its selling price. Net Sales = ₱120,000

4. Identify and compute the

variable cost of sales by Variable Cost = Quantity sold x Variable cost/unit
multiplying the quantity = 50 x ₱2,000
of output sold by its Variable Cost = ₱100,000
variable cost per unit.
 5. Identify and compute the ₱ 5,000 ( rent )
total fixed costs by + ₱ 2,000 (gasoline)
adding all the costs ₱ 3,000 (wages)
necessary to keep the ---------------------
business running. Fixed Cost = ₱ 10,000

Net sales ₱120,000

6. Use simple income
Less: Variable Cost 100,000
statement to compute the
Gross Profit 20,000
profit or loss in the
Less: Fixed Cost 10,000
problem.
Net Profit ₱10,000

Conclusion: A net profit of ₱10,000 is gained in this period because the

net sales made is greater than the costs incurred in the
business.

What do you think will happen if fewer sacks of rice are sold by Susan? Read
the same case problem again and consider the change in the quantity of sacks sold
to the customers.

Rice for Sale

Susan sells sacks of rice with free delivery to her customers. She buys
her supply of rice from a rice trader at ₱ 2,000.00 per sack. She sells it to her
customers at a price with 20% mark-up based on cost. Susan rents a store
space (inclusive of water and light) near the public market for ₱5,000 a
month. During a month of operation, she also incurs gasoline expenses of
₱2,000.00 and pays wages of ₱3,000 to her driver. How much is profit or loss
if during the month, Susan was able to sell 20 sacks of rice?

Steps Solution
Variable cost per sack of rice = ₱2,000
1. Identify and label all the
Fixed Costs of Business = ₱5,000 ( rent ),
information needed to
₱2,000 (gasoline),
solve the problem.
₱3,000 (wages)
2. Compute the selling price Mark-up = cost x desired mark-up rate
of the product. Recall = ₱2,000 x 0.20
previous lesson about Mark-up = ₱400
mark up. In this
problem, a mark-up of Selling Price = cost + mark-up
20% is desired based on = ₱2,000 + ₱400
cost. Selling Price = ₱2,400
3. Compute the net sales by Net Sales= Quantity sold x Selling Price
multiplying the quantity = 20 x ₱2,400
sold by its selling price. Net Sales = ₱48,000
4. Identify and compute the
variable cost of sales by Variable Cost = Quantity sold x Variable cost/unit
multiplying the quantity = 20 x ₱2,000
of output sold by its Variable Cost = ₱40,000
variable cost per unit.
5. Identify and compute the ₱ 5,000 ( rent )
total fixed costs by + ₱ 2,000 (gasoline)
adding all the costs ₱ 3,000 (wages)
necessary to keep the ---------------------
business running. Fixed Cost = ₱ 10,000
Net sales ₱48,000
6. Use simple income
Less: Variable Cost 40,000
statement to compute
Gross Profit 8,000
the profit or loss in the
Less: Fixed Cost 10,000
problem.
Net Loss ( ₱2,000 )
Conclusion: A net loss of ₱2,000 is experienced in this period because the
net sales made is lesser than the costs incurred in the business.

By comparing the results in the profit or loss statement of the case problem, it
can be concluded that it is necessary to put in a lot of hard work and dedication in
business by having a good relationship with customers to ensure profit and avoid
loss.

Activity 3: Case Problem Solving

Direction: Read and analyze the case problem below and use the table on the next
page as your guide in providing answers.

Watch for Less

James buys a local brand of watch from a supplier at ₱1,000.00 each. He

sells them in his store at a regular price of ₱1,500.00. In operating his watch
store, he also incurred other expenses like rent of space at ₱5,000.00 and salary
of his worker for ₱10,000.00 during the month.

Case 1 If during the month of August, James sells 25 units of watches, what is
the profit he gained or the loss he incurred in this transaction?

Case 2 If during the month of August, in order to boost his sales, James offers a
10 % discount for each watch and was able to sell 90 units of watches.
What is the profit he gained or loss he incurred in this transaction?
 Case 1 Case 2
Step 1: Identify and label all the information needed to solve the problem.

Step 2: Compute for the selling price of the product.

Step 3: Compute for the net sales by multiplying the quantity sold by its selling
price.

Step 4: Identify and compute for the variable cost of sales by multiplying the
quantity of output sold by its variable cost per unit.

Step 5: Identify and compute for the total fixed costs by adding all the costs
necessary to keep the business running.

Step 6: Use simple income statement to compute the profit or loss in the problem.

Conclusion:
 What I Have Learned

It is great to know that you put a lot of effort in answering Activity 2 and
Activity 3. Can you now relate with the feelings of an entrepreneur each time the
business experiences profit or loss? Do the next activity to express what you have
learned from the lesson.

Activity 4: Writing what I have learned!

Direction: Complete the statements below.

1. Profit is .

It happens in business when _

2. Loss is .

It happens in business when

 What I Can Do

Finally! You are now going to apply what you have learned in this module by
answering the next case problem. Stay positive and enhance your learning!

Activity 5: Case Problem Solving

Direction: Read and analyze the problem and use the simple income statement to
show your answers in the box below.

Alexander’s Buko Shake

Alexander rents a space at the mall for his buko shake business at ₱10,000
per month. He also pays for water and electricity for ₱5,000 and salary of his store
crew for ₱10,000 every month. He sells his buko shake at ₱35.00 per bottle. The
cost of the materials and ingredients for 100 bottles of buko shake is estimated at
₱2,500.

Required: Compute for the profit or loss if:

Case 1: Alexander was able to sell 1,500 bottles of buko shake in a month.

Case 2: Alexander was able to sell 3,000 bottles of buko shake in a month.

Case 1 Case 2
Step 1: Identify and label all the information needed to solve the problem.

Step 2: Compute for the selling price of the product.

Step 3: Compute for the net sales by multiplying the quantity sold by its selling price.

Step 4: Identify and compute for the variable cost of sales by multiplying the quantity
of output sold by its variable cost per unit.

Step 5: Identify and compute for the total fixed costs by adding all the costs
necessary to keep the business running.

Step 6: Use simple income statement to compute for the profit or loss in the
problem.

Conclusion:
 Assessment

Congratulations! You did well in this module. To check the knowledge and
skills you have gained in this lesson, a post test is prepared for you.

Direction: Read each question carefully and encircle the letter of your answer.

1. What is the difference between the amount invested in business and the
amount received in return?
a. cost
b. loss
c. net sales
d. profit

2. Which of the following is the result when net sales of goods is less than its
cost?
a. break-even
b. cost
c. loss
d. profit

3. What is the amount of money received from the sale of goods after all
deductions such as discounts or refunds are made?
a. cost
b. loss
c. net sales
d. profit

4. Which of the following is the result when net sales of goods is more than its
cost?
a. break-even
b. cost
c. loss
d. profit

5. What is the result when the net sales of goods is equal to the cost incurred
in the business?
a. break-even
b. cost
c. loss
d. profit
For items 6-10, read and analyze the problem and answer the questions that
follow.

T’boli Woven Bags

Marissa sells woven bags made from T’boli to promote the culture of her
hometown. She buys each bag from a supplier at ₱1,500.00 each and sells it in her
shop at a regular price of ₱2,000.00. She spends ₱5,000.00 for the rental of her
shop and ₱6,000.00 for the salary of her worker every month. In order to increase
sales during the month, Marissa offered a 20% discount to her customers and was
able to sell 100 pieces of woven bags.

6. How much is the total fixed cost incurred for the month?
a. ₱ 5,000
b. ₱ 7,000
c. ₱ 11,000
d. ₱ 13,500

7. How much is the total variable cost incurred during the month?
a. ₱ 15,000
b. ₱ 20,000
c. ₱ 150,000
d. ₱ 200,000

8. What is the net price of each woven bag?

a. ₱ 400
b. ₱ 600
c. ₱ 1,400
d. ₱ 1,600

9. How much is the net sales during the month?

a. ₱ 16,000
b. ₱ 20,000
c. ₱ 160,000
d. ₱ 200,000

10. What is the result of Marissa’s business for the month?

a. loss of ₱ 1,000
b. profit of ₱ 1,000
c. neither profit nor loss of ₱ 1,000
d. none of these
For items 11-15, read and analyze the problem and answer the questions that
follow.

Mario’s Dressed Chicken Store

Mario sells dressed chicken in his village. He buys his supply of chicken
from a distributor at ₱140.00 per kilo. He charges a 25% mark-up based on cost to
set up his selling price. Mario rents a small store space for ₱2,000 a month. He also
incurs monthly water and electricity expenses for ₱2,500 and salary of his store
clerk for ₱3,000. During a month of operation, he was able to sell a total of 1,000
kilos of dressed chicken.

11. What is the selling price of the dressed chicken per kilo?
a. ₱ 35
b. ₱ 140
c. ₱ 165
d. ₱ 175

12. How much is the total fixed cost incurred for the month?
a. ₱ 7,500
b. ₱ 14,000
c. ₱ 140,000
d. ₱ 147,500

13. How much is the total variable cost incurred for the month?
a. ₱ 7,500
b. ₱ 14,000
c. ₱ 140,000
d. ₱ 147,500

14. What is the net sales during the month?

a. ₱ 7,500
b. ₱ 17,500
c. ₱ 75,000
d. ₱ 175,000

15. What is the result of Mario’s Dressed Chicken store for the month?
a. loss of ₱ 27,500
b. profit of ₱ 27,500
c. neither profit nor loss of ₱ 27,500
d. none of these
 Additional Activities

You are now about to apply what you have learned in this lesson in real-life
scenario. By looking at the situations of the business establishments around you,
do the activity below.

Activity 6: My Tips to an Entrepreneur!

Direction: Put your feet in the shoes of the business owner and suggest specific
ways on how a business can gain profit and how it can avoid loss.

1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
Answer Key
References
Lopez, B.R., Lundag, L. Dagal, K.A. & Garces, I.J. (2016). Business Math
Textbook. Quezon City: Vibal Group, Inc. pp. 92-95
 DISCLAIMER

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Telefax No.: (083) 2288825/ (083) 2281893

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This Self-learning Module (SLM) was developed by DepEd SOCCSKSARGEN

with the primary objective of preparing for and addressing the new normal.
Contents of this module were based on DepEd’s Most Essential Learning
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