If selling price = ₹1200 and profit = 20%, find cost price.

How to Find Cost Price: A Simple Guide

Ever wondered how much a product really cost the seller? Knowing the cost price is super useful, whether you're buying, selling, or just curious. This guide will show you exactly how to find the cost price, even if you only know the selling price and the profit made.

What is Cost Price?

Let's break down the basics. When a shop buys a product, the price they pay is the Cost Price (CP). It's the original price of the item.

The Selling Price (SP) is the price the shop sells the product for.

The difference between the selling price and the cost price is the profit. If the selling price is higher than the cost price, the seller makes a profit. If the selling price is lower, they make a loss.

Profit Percentage shows the profit as a percentage of the cost price.

The Formula for Cost Price

To find the cost price, we use a simple formula. It helps us work backward from the selling price and the profit percentage. Here it is:

CP = SP / (1 + Profit Percentage)

Let's break it down:

• CP: Cost Price (what we want to find)
• SP: Selling Price (the price the item sold for)
• Profit Percentage: The profit as a percentage (e.g., 20%, 10%)

Step-by-Step: Finding the Cost Price

Let's say a product was sold for ₹1200, and the profit was 20%. Here's how to find the cost price:

1. Know the information:
   • Selling Price (SP) = ₹1200
   • Profit = 20%
2. Convert Profit Percentage to a Decimal:

   20% = 0.20 (Divide the percentage by 100)

3. Apply the Formula:

   CP = 1200 / (1 + 0.20)

4. Calculate:

   CP = 1200 / 1.20

   CP = ₹1000

The cost price of the product is ₹1000.

Real-World Examples

Let's look at a few more examples:

1. Example 1:
   • Selling Price: ₹500
   • Profit: 25% (0.25)
   • CP = 500 / (1 + 0.25) = 500 / 1.25 = ₹400
2. Example 2:
   • Selling Price: ₹2000
   • Profit: 10% (0.10)
   • CP = 2000 / (1 + 0.10) = 2000 / 1.10 = ₹1818.18 (approximately)

Conclusion

You now know how to find the cost price! We started with the selling price and the profit percentage, and used a simple formula. Knowing the cost price is key to understanding the true value of a product.

Keep practicing, and you'll be a cost price expert in no time!