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Cost price (C.P.):
The cost price is divided into two parts, namely, purchase price and overhead expenses.
The purchase price is the amount used up to buy things from a manufacturer.
The overhead expenses include the transport charges, worker wages, and other such charges that incur along the way.
\text{Cost price} = \text{Purchase price} + \text{Overhead expenses}
It spends Rs.500 on raw materials which is the product price.
It spends Rs.100 on transport, Rs.150 as labour charges and Rs.200 goes in as electricity charges. These expenses are the overhead expenses.
So the cost price of a shoe would be the total sum of the product price and the overhead expenses.
\text{Cost price (C.P.)} = \text{Product price} + \text{Overhead expenses}
= 500 + 100 + 150 + 200
= Rs.950
Marked price (M.P.):
The dealer buys the commodity from the manufacturer. To make a profit, he marks a price higher than the cost price of the commodity. This newly arrived price is called the marked price or the tag price.
If the dealer buys the shoe for Rs.950 and the dealer wishes to make a profit of Rs.300, then he would have Rs.1250 as the marked price.
\text{Marked price} = \text{Cost price} + \text{Profit intended}
= 950 + 300
= Rs.1250
Discount:
A reduction in marked price mainly to attract customers is a discount.
Continuing with the previous example, we have:
Here the marked price is Rs.1250 and the now the dealer wishes to attract the customer by giving discount of Rs.100 on the marked price.
Discount offered = Rs.100
Selling price (S.P.):
Selling price is what the customer pays for the commodity after availing the discount.
Continuing with the previous example, we have:
Here the customer will receive the commodity after applying the discount amount if there are.
\text{Selling price} = \text{Marked price} - \text{Discount}
= Rs.1250 - Rs.100
= Rs.1150
Few more examples of selling price:
1. A customer buys a toothpaste worth Rs.40.
2. A customer buys a mobile phone worth Rs.10000.
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