Alva Joyce F.
Villegas
G12 ABM ADR
ENTREPRENEURSHIP
Module 8: Computation of Gross Profit
What I Know
What’s New
1. How much Rodrigo does earned profit?
Rodrigo earned a profit amounting to P60 000. Each perfume has a
profit of P500 and when the said amount is multiplied to 12
perfumes, the profit per box will be P6 000. He purchased a total of
10 boxes of perfume, overall in his buy and sell business he had a
profit of P60 000.
2. Is it good to engage in a business? Yes or No?
It is good to engage in a business because one can earn money
through it. It will eventually make someone innovative wherein
he/she can generate new ideas that can help the community. A
business can be a source of living at the same time provides the
needs and wants of the people. As business continues to operate,
the experience and knowledge that you will get as an entrepreneur
is great way in honing someone into a successful businessman.
3. What do you think of Rodrigo’s business? Is it good for a beginner?
For a beginner in the field of business, one must consider the
product that he/she will sell. Rodrigo’s business is good for a
beginner because at the start of every business, trial is needed.
The boxes that he purchased should test if the product will become
a hit in the market. The mark-up that is added on the cost is low,
and it is a great way to your product to be known. Consumers tend
to assess the merchandise. After the product is being recognized
and loyalty was there within the buyers, the mark-up can
eventually increase little by little.
What’s More
a. Gross Profit Rate
Net Sales P180 000 𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
Gross Profit Rate=
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Less: Cost of Sales 190 000
−10 000
Gross Profit Rate=
180 000
Gross Profit -P10 000
Gross Profit Rate= -5.56%
Gross Profit -P10 000 b. Operating Profit Margin Rate
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛
Less: Operating Expenses 0 OPMR =
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Operating Profit Margin -P10 000 OPMR =
−10 000
180 000
OPMR= -5.56%
Operating Profit Margin -P10 000 c. Net Profit Margin Rate
Add: Interest Income 0 NPMR=
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Total -P10 000 −10 000
NPMR =
180 000
Less: Interest Expense 0
NPMR = -5.56%
Income tax 0
Net profit Margin -P10 000
d. Return on Investment
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
NPMR=
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
−10 000
NPMR =
190 000
NPMR = -5.26%
What was her profit or loss?
Annie has a loss of P10 000 because she sold half
dozen of the smartphone below its cost.
Now ask yourself the following questions
1. Is creativity present in the operation of ordinary small businesses along
the streets and highways and in your neighborhood? Why do you say so?
Businesses that can be seen along the streets and highways have creativity
being presented although they are ordinary small business. It can attract the
customers to buy their products. Even the names of the businesses are catchy
and creativity can be seen. The way they make their own product makes it
unique and different from other businesses that sell the same goods. Promotion
is also evident.
2. Will you consider the daily business practices of the small owner
within the concept of entrepreneurships? Why?
As a student taking up accountancy business and management, I can
consider the daily business practices of the small owner within the concept of
entrepreneurships because they are innovative wherein they generate new
concepts and ideas that are unfamiliar to the customers. The owners are risk
takers and willing to enter the market without any hesitations yet still consider
the factors that can affect the business.
What I Can Do
Conduct an interview of at least three (3) successful business people in your
locality, use the following questions as your guidelines:
1. What made him motivate to start a business?
I interviewed 3 successful business people in the locality. First is
Mr. Noscal, Argosino Papermart owner, according to him, he wants to
provide the needs of the people in the community especially those
students that are gaining knowledge every time they use the product that
they sell. The goods that they retail can be a ladder on achieving
someone’s dream. Next is Mr. Gamaya, he had seen the kind of living in
the town which is through agriculture. Through his business, he is able
to be a partner of the townspeople in their livelihood because he is selling
feeds to pigs and chickens. Mr. Tan is known for buying the crops of the
farmers in the town. Based on the interview, the income that he will
generate which can be a source of living for their family is what
motivated him to start a business. By starting the business and
continuous operation through the years, he can now feel the success
that he aims for.
2. What is the nature of his business?
Their nature of business is all sole proprietorship.
3.How much capital involved?
The capital of Mr. Noscal for his business is ranging from P300 000
to P500 000, the rent, purchased equipment, and the merchandise are
already included on the mentioned amount. Meanwhile, Mr. Gamaya’s
Capital is more or less than P400 000. Lastly, according to Mr. Tan , he
had a starting capital that is close to P200 000 since he is involve in a
buy and sell kind of business and equipment and materials are not that
important.
4. How many years of existence?
Mr. Noscal now is over 18 years in the operations and up until now
they still give the needs of the people. The business of Mr. Gamaya is
now over 10 years in the market. Mr. Tan’s business is serving over 20
years among the people.
5. Did you consider the population of the community?
Mr. Noscal said that they considered the population of the
community. Lopez has lots of schools such as elementary, high school,
universities along the rural and urban area; therefore there are
numerous students who are in need of school supplies. The same answer
goes to Mr. Gamaya, he mentioned that the livelihood of the people in the
town is through agriculture that’s why population in the community is
considered in establishing the business. Mr. Tan also consider the
population of the community just like the reason of Mr. Gamaya.
6. How much gross profit did you earn for the first year of operation?
For the first year of operation, Mr. Noscal has a gross profit of one-
half of his capital amounting to P150 000 while Mr. Gamaya has a gross
profit of P 200 000 and Mr. Tan has P100 00 for the first year of
operation.
Assessment
Additional Activities
1. A watch store owner decided to offer 20% discount for a particular brand of watch
that sells at P35,000.00. By doing so, his average sales increased from 5 watches
to 12 watches a day. If he bought one watch at a price of P22,000.00 from the
supplier, by how much was his daily profit increased or decreased by offering such
discount on the watch?
With Discount
Regular Price
Net Sales P336 000
Net Sales P175 000
Less: Cost of sales 264 000
Less: Cost of sales 110 000
Gross profit P72 000
Gross profit P65 000
Based on the computations shown above, it is evident
that daily profit of the watch store owner increased by
P7 000 due to the discount being offered on the watch.
2. Michelle went to Baguio and bought 20 jars of strawberry jam for
P3,500.00 with 1 5% discount. When she got back to Manila, she sold 10 of
the jars for a total of P1, 800.00and the rest as P185.00 each. How much profit
did Michelle gain?
Net Sales P3650
Less: Cost of Sales 2975
Gross Profit P675
Michelle gained a profit amounting to P675. The first ten jars being sold
cost P1800 and other ten jars cost P1850, a total net sales of P3650.
