How much is SP when CP and overhead expenses is given?
Answers
Answer:
The overhead charges become a part of the cost price.
Suppose a person buys some goods from California for $4500 and sells them in New York for $5700; it seems as the person has made a profit = $5700 - $4500 = $1200
So, does he actually gain $1200 on this transaction?
It is not true because the person must have definitely spent some money on:
(i) his travelling from New York to California and then back to New York;
(ii) transportation of the goods bought, etc.
Because of these extra expenses (which is known as overheads), the actual profit made by the person becomes less than $1200. Sometimes, he may even have loss in such a transaction if the overhead expenses exceed $1200.
Cost price (C.P.) = Payment made while purchasing the articles + overhead charges (i.e. extra expenses).
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