11

BUSINESS
MATHEMATICS
Quarter 3- Module 2:

Department of Education ● Republic of the Philippines

 11
Business Mathematics –
Grade 12 Alternative
Delivery Mode Module 2
First Edition, 2020

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Chairperson: Dr. Arturo B. Bayocot, CESO III
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 BUSINESS
MATHEMATICS
Quarter 3- Module 2:
Profit and Loss
Simple Interest and Mortgages

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and universities.
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 TABLE OF CONTENTS
What This Module is About...................................................................................i
What I Need to Know...........................................................................................ii
General Instruction...............................................................................................ii
Icons of this Module..............................................................................................iii
What I Know.........................................................................................................iv
Lesson 4:
Profit, Loss, and Breakeven Point Analysis
What’s In................................................................................................................1
What’s New........................................................................................................1
What is It...............................................................................................2
What’s More.......................................................................................................4
What I have Learned.............................................................................................5
What I can do.........................................................................................6
Additional Activity...................................................................................................7
Lesson 5:
Simple Interest and Mortgages
What’s In...............................................................................................................8
What’s New.......................................................................................................8
What is It..............................................................................................9
What’s More......................................................................................................14
What I have Learned............................................................................................15
What I can do........................................................................................16
Additional Activity.................................................................................................16

Assessment................................................................................................................17
.
What This Module is About

Maybe you have encountered already the words “Profit”, “Loss”, and
“Breakeven Point”, but you don’t know yet how these terms work in the real
business world scenarios.
In this module, you will learn deeper how these terms work in the business
world. How do companies obtain profit or loss? The students will understand the
difference between profit and loss through various examples given in this module.
You will have an idea on how to set the prices appropriately for a certain product in
order to achieve the desired profit. Included here is the breakeven point definition
and computation. You will learn the importance of knowing and identifying the
breakeven point and what it means when company meet the breakeven point only.
Important components of a profit and loss statement are purposely included in this
module to give you ideas how the profit and loss statement looks like and know its
importance in business. You will learn, through this module, how to compute simple
interest on loans and how mortgages are computed.

The Lessons included in this module are:

Lesson 1- Profit, Loss, and Breakeven Point Analysis

Lesson 2- Simple Interest and Mortgages

i
 What I Need to Know

After reading this module, you are expected to:

1. differentiate profit from loss;
2. illustrate how profit is obtained and how to avoid loss in a given
transaction;
3. determine the break-even point;
4. solve problems involving buying and selling products; and
5. compute interest specifically as applied to mortgage or amortization,
and on services or utilities and on deposits and loans.

General Instruction:

1. Read every detail in this module with comprehension.

2. Answer the activities diligently and intelligently.

3. Be mindful of the deadlines set. Submit activities and exercises on

time.

4. Be responsible and do not crumple or write anything on this module.

5. Be honest at all times in answering the activities and assessments in

this module.

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Icons of this Module:

What I need to This part contains learning objectives

Know that are set for you to learn as you go
along the module.

What I Know This is an assessment as to your level of

knowledge to the subject matter at hand,
meant specifically to gauge previous
knowledge.

What’s In This part connects previous lesson with

that of the new lesson.

What’s New This part is an introduction of the new

lesson through various activities before it
is presented to you.

What is It This part provides the discussion of the

activity conducted to deepen your
understanding of the concepts.

What’s More This part provides activities that serve as

follow-up or enrichment to master the
learning competencies.

What I This part assesses you on how far you

have have mastered the competencies.
Learned

What I can Do This provides tasks for you to

demonstrate the knowledge and skills
you gained and apply it real life
experiences.

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 What I Know

Read the scenarios below and answer the corresponding questions.

1. You purchased a dress for ₱950.00. Transportation for going to the mall to
buy the dress is ₱75.00. You plan to sell the dress to your friend after
realizing that you don’t need a new dress for the party. Know how much will
be your profit or loss considering the two scenarios below.
a. You sold the bag to your friend for ₱1,355.00.
b. You sold the bag to your friends for ₱700.00.
2. What is the business doing at the breakeven point?
a. making profit
b. making loss
c. making neither a profit nor loss
d. 50% profit and 50% loss
3. Which of the following shows the breakeven
point?
a. Fixed Cost – Variable Cost = Sales Revenue
b. Fixed costs + Variable Costs= Sales Revenue
c) Fixed Costs x Variable Costs= Sales Revenue
d) Fixed Cost / Variable Costs= Sales Revenue
4. If the variable cost of a perfume is 120 and it’s selling price is 250, what is
the contribution?
a. 370
b. 125
c. 130
d. 570
5. Why is it important for business to know the breakeven points of their
products?
a. It helps improve the business.
b. They can use information when preparing financial statement.
c. It can be used in the process of planning.
d. It is an important calculation in accounting.
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For numbers 6 and 7, consider and study the problem below.

Teresita borrowed ₱2,000.00 from her friend at an interest rate of 1% per month.
She promised to pay it within 3 months.

6. How much interest will Teresita have to pay for the term of the
loan? a. P 55.00
b. P 50.00
c. P 60.00
d. P 70.00

7. How much will she pay at the end of the loan period (maturity
date)? a. P 2,050.00
b. P 2,060.00
c. P 2,070.00
d. P 2,055.00

For numbers 8-10, consider and study the problem below.

You are planning to buy a house and lot and secure a mortgage. The price of the
house and lot is P 2 400 000.00. The real estate is asking for a 20% down payment.
8. How much is the down payment?
a. P 400,015.00
b. P 480,000.00
c. P 253,005.00
d. P 299,225.00

9. How much would be the amount of the mortgage

loan? a. P 2,454,015.00
b. P 3,111,425.00
c. P 2,100,205.00
d. P 1,920,000.00

10.If Lilia paid ₱980.00 in interest at 14% for 2 years, how much money did she
borrow?
a. P 2,015.00
b. P 5,425.00
c. P 3,500.00
d. P 1,225.00

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 Lesson Profit, Loss, and Break-even
4 Point Analysis

What’s In

You have learned from the previous module about Mark-up, Markdown,
Margin, and Trade discount. Mark-on or mark-up are amounts added to the cost to
arrive at the new selling price. If your objective is to increase the volume of your
products; then, you can apply the markdown pricing strategy. Markdown is a
reduction of amount in the original selling price. It happens oftentimes when the
market status is not doing so well. Trade discount is the amount deducted from the
list price by the manufacturers or traders granted to buyers. All the terms mentioned
here are associated in the new lesson, profit, loss, and breakeven point analysis.
The lessons that you are about to learn will tell you the result if the prices and
discounts that have been set up will result to gain or loss or just reach the
breakeven point.

What’s New

Activity 1. Shuffled Terms

Put the words with its corresponding amount into its proper place in the financial
statement. Make the calculation to see if the company incurred Profit or Loss.

Net Profit: 35,500 Other Income: Sales: 2,300

Operating Profit: 34,400 117,000
Cost of Sales:59,000Operating Expenses: 23,600
Other Expenses:1,200Gross Margin/Profit: 58,000

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 What is It

Cost is the cost of the product sold or service rendered.

Expenses refer to operating expenses (administrative and selling expenses) and
financial expenses (interest and other finance charges).
Profit is what remains of the selling price (sales) after all costs and expenses had
been deducted.
Loss occurs when the cost and expenses exceed the selling price or sales.

For Example:
Carmen does buy and sell. She bought a perfume for ₱450.00. She sold it for
₱600.00.
A. How much was her margin (sales minus the cost)?
Answer: 600-450=150

B. What was the rate of her margin? (𝑀𝑈-𝑠𝑝.)- (calculated as margin divided by
the sales)?
Answer: 150/600=25%
C. What was the markup based on cost?
Answer: 150/450= 33.33%
D. How much profit did she earn?
Answer: 600-450= 150

Income Statement is the financial statement that shows the results of operation if it
earns a profit or incurs a loss for a given period of time.

Cost of sales is the purchase price and other expenses incurred in buying the
products that the business has to sell including the freight-in or transportation of the
goods it buys for resale.

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Operating expenses are expenses incurred to run the business.

Other income includes interest income and other incidental income the firm earns
like rent income if it has a property being rented out.

Other expense includes interest expense or finance charges financial institutions

charge firms for their services.

Gross profit is at times referred to as gross margin.

Operating profit/loss is gross profit less operating expenses.

Net profit/loss is operating profit plus other income less other expenses.

Break-even Point is the point where a business neither makes a profit nor a loss.

Sales = Variable costs + Fixed Costs

Variable costs are costs that vary with output. Variable costs increase at a constant
rate relative to labor and capital. (includes raw materials, packaging, and labor
directly involved in a company’s manufacturing processes).

Fixed costs remain the same no matter how much output a company produces
(rent, salaries, property taxes, insurance, etc.)

Formula of Breakeven Point:

If we let 𝑥 represent the number of units to break-even, we can use the
following formula adopted from the previous formula:
𝑃𝗑 = 𝑣𝗑 + 𝐹𝐶
𝑃 is the unit price 𝑉 is the variable cost per unit
𝗑 is the number of units𝐹𝐶 is the total fixed cost

To solve for 𝑥:
𝒙(𝑷 − 𝒗) = 𝑭𝑪
𝑃𝗑 − 𝑣𝗑 = 𝐹𝐶 𝑭𝑪 (break-even point in number of units)
𝒙 = (𝑷−𝒗)

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 What’s More
Activity 2 Practice your skills:
Direction: Color the heart RED if the scenario shows profit; BLUE if there is
loss, and GREEN if it is breakeven. Assuming scenarios below are for the year
ended Dec. 31, 2020.
1) “Build Me UP” Company recorded
an annual sale of 500,000 for its
hardware business. The total cost of
sales per month is 25,500 and an
annual fixed cost of 300,000. The
company pays a monthly interest of
1.5% for 5 years for the 1,000,000.00
borrowed amount from the bank. The
company also owns space for rent
and is receiving an additional income
of 250,000 annually. Color the heart if
“Build Me Up” company earns, profit,
loss, or just breakeven at the end of
the year.
3)“Butter Cup” coffee shop located in
in the city sold 50,000 cups of coffee
at P55.00 each in a year. The direct
cost for each cup sold is at P20.00.
Based from their record they are
spending 615,000 fixed costs in a
year which includes (electricity,
water, telephone, rent, salaries and
wages, and etc). It is paying 5%
interest of the 1,500,000 loan amount
on a yearly basis for 10 years. The
shop is paying an annual tax of
50,000. What color would you use for
heart below?
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2) Khazana dress line shop is
getting a monthly sale of
50,000. 10,018 is deemed to be
its monthly direct cost.
Administrative staff salaries,
electricity, telephone bill, rent
and other operating expenses
total amount is 490,484 yearly.
The shop is receiving a monthly
commission income amounting
to 10,700.00
The store sales for the year in
selling rice is 600,000.00. Per
record their cost of sales is
310,000.00. Operating expenses
are Rent 23,000, .advertising
35,000,office supplies 20,000,
electricity and water 40,000, and
miscellaneous expenses 22,000.
The firm borrowed money from
the bank for which it paid
25,000 interest on a monthly
basis. What do you think would
be the color of the heart below?
 What I have Learned

Profit is what remains after all costs and expenses had been deducted from
the sales. This is a good indicator that the business is doing good in the market. On
the other hand, loss is the opposite of profit. Loss happens when total costs and
expenses exceeded the sales. Breakeven is the point when business neither incur
profit nor loss. Breakeven point analysis can be used to identify the volume of sales
needed to be achieved to cover the costs (variable and fixed).

Reflective Question:
How important is learning profit, loss, and breakeven point as ABM students who
wish to join the corporate world or who wish to build your own company in the
future?

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 What I Can Do

Activity 3
1. Assuming that you have P5,000,000.00. List down names of companies
where you are going to invest your money and explain why.

2. ABC Co. makes and sells stuffed animals. One product, Bucky Bears, sells for
$28 per bear. Bucky Bears have fixed costs of $100,000 per month and a
variable cost of $12 per bear. How many Michael Bears must be produced
and sold each month to break even?

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 Additional Activities

Complete the sentence below.

After doing the activities:
1. I noticed

2. One question I have is

3. I’m not sure

4. I realized

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 Lesson Simple Interest and
5 Mortgages

What’s In

You have learned about the important concept in profit and loss which is the
break – even analysis. When the total cost is higher than revenue, the level of sales
is losing. When revenue is higher than total cost, the business is making a profit and
if it is already equal to total cost it is called the break – even point. The lesson that
you are about to learn will teach you how to acquire additional charges.

What’s New

Activity 1. Tic Tac Toe

This is a 1 minute –game only. Answer the questions given. Choices are inside the
table below. Write the number inside the parenthesis. Remember, you only have 1
life; thus, erasure is strictly not allowed.

P2,500.00 ( ) P26.958.81 ( ) P12,066.44 ( )

P23,050.55 ( ) P200,050.00 ( ) P183,345.00 ( )

P183,000.00 ( ) P571,550.00 ( ) P33,000.00 ( )

P78,987.03 ( ) P17,739.67 ( ) P 18,564.50 ( )

P105,500.00 ( ) P1,537.50 ( ) P 19,502.01 ( )

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 1. You get a student loan from BPI Educational Assistance to pay for your
educational expenses this year. What is the interest of your loan if you
borrowed P20,500 at 7.5 % for 1 year?

2. You are starting your new online business. You borrow P10,000 from the
bank at 10% rate for 6 years. How much interest are you going to pay for
this loan?

3. You are tired at the end of the term and decide to borrow P150,000.00 to
go on a trip to Hongkong. You used your credit card to pay for your airfare
tickets and hotel accommodation at 11% for 2 years. How much total
interest will you be paying for 2 years?

4. In connection to item number 3, how much will you have to pay at the
end of 2 years?
5. A Toyota Fortuner is priced at P1,633,000.00. The car dealer is asking for
a 35% down payment and an installment term of 5 years at a monthly
interest of 1.5%. How much is the total down payment?

6. Based from the situation in item number 5, how much is the monthly
amortization?

What is It

Principal is the amount borrowed.

Rate (interest rate) is the cost of using money

expressed as a percentage of the principal for a
given period of time, which is is usually per
month and year.

Time is the term of period of the loan.

Interest Expense is the amount of money charged for the use of borrowed money
(point of view of the borrower).

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Interest Income is the amount of money earned on the invested money or money
lent
(point of view of the creditor).

Simple Interest Formula:

I=Prt
I – interest (amount paid for the use of money)
P – principal (amount borrowed/lent/invested)
r – rate (percent of interest being charged to the money)
t – time (number of periods for which the money will be borrowed/lent/invested)

MATURITY VALUE
(F): Note:
F=P+I The rate and the time should always agree, that is, if
F = P + (P r rate is per annum, time should be in years; if rate is per
month, time should be in months; and if rate is per day,
t) F = P (1 +
time should always be in days. In the absence of
r t) stipulation to the contrary, a stated rate of interest is
understood to be on a per annum or annual basis.

EXAMPLE :
Tessa borrowed ₱2,000.00 at 12% interest for 2 years.
Find the interest
(I)=P r t
(2000x12%x2) =P480.00

and the maturity value (F)= P+I

(2000+480.00) =P2,480.00

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 ACTUAL TIME AND APPROXIMATE TIME

Approximate time assumes that each of the 12 months in a year has 30 days (360
days in a year)
Actual time counts the exact number of days (365 days in a year)

Let’s Try!
1. Find the actual time and approximate time between April 22 and August 25.

Actual Time: Approximate Time

April has 30 days Months Days

-22 8 (August) 25(Aug 25)

Days in April 8 -4 (April) -22 (Apr 22)

May 31 4 months 3 days
June 30 4 x30days/months
July 35 120 days
August 25 + 3 days
125 days 123 days
2. Find the actual time and approximate time between March 15 and November
6.

Actual Time Approximate time

March has 31 November 10 36 November
6
15 March 3 15 March 15
Days in 16 Months 7 21 Days
March
April 30 Approx # days 30
May 31 Total No. of days 210

June 30 21
July 31
August 31
September 30
October 31
November 6
No. of days 236 231

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 ══ ══
3. Find the actual time and approximate time between October 18, 2015 and
March 2,2019.

Actual Time Approximate time

October has 31 March 14 32 March 2
18 October 10 18 October 18
Days in Oct 13 Months 6 14 Days
November 30 Approx # days 30
December 31 Total No. of days 120

Year 2015 74 14
Year 2016 365 134
Year 2017 365
Year 2018 365 Year 2019
Year 2019 Year 2018 360
January 31 Year 2017 360
February 28 Year 2016 360
March 2 Year 2015
No. of days 1,230 1,214
══ ══

ORDINARY AND EXACT INTEREST

Ordinary interest is taken as 360 days.
Exact interest is taken as 365 days.

Formula:
𝐷
𝐼𝑜 = 𝑃 × 𝑟 ×
360
𝐷
𝐼𝑒 = 𝑃 × 𝑟 ×
365
Example:
1. Compute for (a) ordinary interest and (b) exact interest on ₱1000.00 at 8%
for 90 days.
a) I= P x r x D/360 b) I= P x r x D/365
=1000 x .08 x .25 =1000 x .08 x .02466
=20.00 = 19.73

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 2. Compute for (a) ordinary interest and (b) exact interest on ₱2,000.00 at 1%
per month for 60 days.

a) 2,000 (1% x 12 mos) x (60/360) b) 2,000 (1% x 12) x (60/365)

2,000 x 1.12 x 0.166667 2,000 x 0.12
x 0.16438
= 40.00 = 39.45
Mortgage loan is when you use your property as collateral for a loan from a financial
institution.
Down payment is a certain percent of the purchase price of the item or property.

Example:
Assume that you wish to purchase a second hand car worth P312,000.00 and the
seller requires a 20% down payment.

Compute for the down payment: Mortgage Loan:

= Purchase Price x Down payment % Purchase Price-DP
= 312,500 x 20% 31,2500-62,500.00
= 62,500.00 P 250,000.00

Amortization is the installment payment of the loan.

Example:
Assuming that you will be paying the loan on a monthly basis for 30 years, this
means that you will have 360 payments to be made in order to fully pay the loan
that you have acquired.
Monthly Payment (granting there is no interest):
P250,000.00 / 360.00 = 694.44

Monthly Payment (with interest):

Assuming that the bank will charge 5% annually. The 5% is called the annual
percentage rate or APR. Since you are to make monthly payment, we have to
convert the 5% APR to a monthly rate.
(5%/12= 0.416%)

Formula to get the monthly payment:

A= i x P x (1 + i) n
( 1 + I )n -1
Where:
A is the monthly payment
P is the loan’s initial amount
I is the monthly interest rate

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 N is the total number of payments
Solution
𝐴= (0.00416)(𝑃250,000) x (1+.00416)360
(1+0.00416)360-1
= P1,342.05- monthly amortization

Thus, if the monthly amortization is P1,342.05 x 360 months=

P483,138.00 P483,138.00- P250,000= P233,138.00

Even though the monthly payment is fixed, the amount of money paid to interest
and principal varies each month.

For the 1st payment, to determine what portion of the P1,342.05 goes to the
interest, we multiply the principal balance of P250,000 by the monthly interest rate
of 0.0041667 to get P1,041.67.

Therefore, deducting P1,041.67 from P1,342.05 payment, will result in P300.38 only.
Deducting the P300.38 from P250,000, the new balance of the mortgage loan will
now be P249,669.62.

What’s More

Activity 2: Practice your skills:

Prepare an amortization schedule following the steps given for a P2,500,000.00

mortgage loan at an APR of 6% for a term of 30 years.

1
 What I have Learned

In business, capital is very important. Though, not all business owners always
have enough capital to sustain their business. More often than not, they have to
borrow money for use in the business. Interest plays an important role in this
context. Borrowers need to pay interest on the money that they borrow.
The quick and easy method of calculating the interest charge on a loan is
called Simple interest. It is determined by multiplying the daily interest rate by the
principal by the number of days that elapse between payments. This will help you
understand how banks and other lenders like building societies make decisions
about providing mortgages. You also know how to manage mortgages. If you are
going to be responsible in paying mortgages in the future, you should know exactly
what a mortgage is. Since mortgages usually involve a long – term payment plan,
monthly payments, it is essential to understand how they work.

Reflective Question:
Why do I need to know how to compute simple interest and mortgages in
my studies as an ABM student?

1
 What I Can Do

Activity 4
Interview someone who borrowed from the bank, know how much is the rate
applied to the loan, term of loan, and the monthly amortization.

Additional Activities

Complete the sentence below.

After doing the activities:
1. I noticed

2. A question I have is

3. I’m not sure

4. I realized

1
 Assessment

A. Identify whether the statement shows a profit or loss. Write P for Profit and L for
Loss.
1. Charry bought a book at P 105.00 each and sold it for P 150.00.
2. Chumpy bought a cellphone at P5,500.00 When a new model was
introduced in the market after 2 months, he sold the cellphone for
P3,200.00 to buy the new one.
3. A street vendor purchased 60 pieces fishball at P5.00 each and sold it at
P50.00 per dozen.
4. The cost of 25 boxes of chocolates is P1,500.00. It was sold at P100.00 for
each box.
5. Kristoff bought a new laptop at P21,900 with 5% discount from the trader.
He decided to sell it to his friend after a month for P21,000.00

B. Solve the following problems

1. Calculate the break-even point in units and in peso from the following
information:
Unit price ₱20
Variable price ₱8
Fixed Cost ₱ 12,000
2. Find the break-even point in units and in peso given that the unit price of a
certain commodity is ₱15.00; variable cost, ₱5.00; and total fixed cost,
₱18,000.00.
3. Gwyn bought a car for P1,500.000.00 and spent P55,000.00 on its
accessories. She later sold it for P1,950,000.00 after 5 months. How much is
Gwyn’s profit?
4. Marsha bought 12 dozen chairs at P250.00 each chair. She sold 12 of them at
P 350.00 each chair and the remaining chairs at P150.00. Calculate how
much is her profit or loss.
5. A trader losses P50,000.00 when he sells his office equipment at a loss of
25%.
How much is the selling price of his office equipment?
6. Eunice lent ₱3,000.00 at 14% for 6 months. How much will she get at the end
of the term?
7. How much interest did she earn?
8. Nora invested ₱1,800.00 for 9 months at 1% per month. How much will she
get upon maturity? How much interest did she earn?
9. The Villarica Pawnshop charges 24% simple interest on the loan value of all
items pawned to them. If Rose pawned her necklace for ₱1,200.00, how

1
 much will she pay the pawnshop after 90 days assuming Villarica Pawnshop
charges exact interest?
10.The Villarica Pawnshop charges 24% simple interest on the loan value of all
items pawned to them. If Rose Pawned her necklace for ₱1,200.00, how
much will she pay the pawnshop after 90 days assuming Villarica Pawnshop
charges ordinary interest?

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