Reyhan Huseynova

Business Management
Tue/Apr/20/2021
Activity: 30.1; 30.2

ACTIVITY 30.1
Calculating gross profit
[16 marks, 16 minutes]
1 Calculate gross profit for Cosy Corner Retailers Ltd
for the financial year ending 31 October 2013.
Show all of your workings.
■ 1,500 items sold for $5 each
■ opening stocks were valued at $500
■ purchases totaled $3,000
■ closing stocks were $1,000. [5]

2 Explain two reasons why you think it is important

for any business to make a profit. [6]

3 Cambridge Boxes Ltd sold 3,500 units in the last

financial year ending 31 December 2013. The selling
price was $4. Opening stocks were 200 boxes.
The business purchased 4,000 boxes during the year.
All boxes cost the company $2 each. Calculate the
value of closing stocks and the company’s gross
profit in 2013. [5]

ANSWERS:

1.

a) Revenue = 5 x 1,500 = $7,500

Cost of sales = opening stock + purchases – closing stock

= 500 + 3,000 – 1,000 = $2,500

Gross profit = 7,500 – 2,500

= $5,000
b)
 The benefit is the compensation to a businessperson for the venture.
Without making a benefit, proprietors would pull out their speculation
and close the business.
 The benefit is expected to back development. Benefits are re-putting
into the business to buy the fixed resources expected to assist the
business with developing.
 2.

Turnover = 4 x 3,500 = $14,000

Closing stock = opening stock + purchases – sales

= 200 + 4,000 – 3,500 = 700 units.
Value of closing stock = 2 x 700 = $1,400

Cost of sales = 2 x 3,500 = $7,000

Gross profit = 14,000 – 7,000 = $7,000

ACTIVITY 30.2
Calculating profit
Rodrigues buys second-hand computers, updates
and cleans them and then sells them in his small
shop, Rodrigues Traders. He has many customers
who are keen to buy computers at prices below
those charged for new machines. Rodrigues took
out a bank loan to buy his shop – he has since repaid
half of this loan. He employs three electricians to
help him with the computer work. He is the main
shareholder in the business – three of his friends also
invested in the company when it was first set up.

Income statement for Rodrigues Traders plc for the

year ending 31 October 2013
[17 marks, 25 minutes]

1 Calculate the missing values U–Z for the different

types of profit for Rodrigues Traders. [5]

2 State three stakeholders in this business who

would be interested in these profit figures. [3]

3 For each stakeholder group identified, explain

why the profits of this business are important. [9]
 1.

Gross profit (U) = revenue – cost of sales = 12,000 – 4,00 = $8,000

Operating profit (V) = gross profit – overheads = 8,000 – 3,000 = $5,000
Profit before tax (X) = operating profit – interest = 5,000 – 1,000 = $4,000
Profit after tax (Y) = profit before tax – tax = 4,000 – 800 = $3,200
Retained profit (Z) = profit after tax – dividends = 3,200 – 1,200 = $2,000

2.

 Banks
 Shareholders – Rodrigues and three friends
 Government
 Employees – three electricians
 Local community

3.

Stakeholder Importance of profit

BANKS Will want their loan to be repaid – if the
business is not making a profit, then it will
struggle to repay the loan
SHAREHOLDERS-RODRIGUES AND Affect dividends available for distribution to
FRIENDS shareholders
Affect value of the business
Source of finance for future growth
GOVERNMENT Taxation
Jobs
EMPLOYEES Job Security
Wage Negotiations
LOCAL COMMUNITY Jobs created by profitable businesses
Increase in spending in the local community
associated with employment