Define cost price , marked price and selling price ? Plz explain with examples…
The Correct Answer and Explanation is:
Cost Price (C.P.):
The cost price refers to the original price at which a seller buys a product or the price at which the product is produced. It includes the expenses such as raw materials, labor, and other associated costs. The cost price is essential for determining the profit margin and helps in pricing the product correctly.
Marked Price (M.P.):
The marked price is the price displayed on a product before any discounts or offers are applied. It is the original selling price set by the seller. The marked price can be considered as the “list price” or “sticker price” of the item and is often higher than the actual selling price after a discount is applied.
Selling Price (S.P.):
The selling price is the final price at which a product is sold to the customer. It is determined by applying any discounts to the marked price or by keeping it at the same level as the marked price if there are no discounts. The selling price directly affects the seller’s revenue and is the price customers pay.
Example:
Let’s consider a shopkeeper who buys a mobile phone.
- Cost Price (C.P.):
The shopkeeper buys the mobile phone for $200. - Marked Price (M.P.):
The shopkeeper marks the price of the phone at $300 on the tag. - Selling Price (S.P.):
The shopkeeper offers a 20% discount on the marked price. Therefore, the discount is $60 (20% of $300).
The selling price becomes $300 – $60 = $240.
In this example:
- The cost price is $200 (what the shopkeeper paid for the phone).
- The marked price is $300 (the price displayed on the phone).
- The selling price is $240 (the final price after applying the discount).
By calculating these values, the shopkeeper makes a profit of $240 – $200 = $40 on the sale. This distinction between the cost price, marked price, and selling price is crucial for businesses to calculate profit margins, set appropriate prices, and manage inventory effectively.
