Home - Work Questions 4-7 Word Document

Answers

Details
Sales 230,000 (Credit sales of 200,000 + Cash Sales 30,000)
Less: Cost of Sales 140,000 Note: Cost of Sales is the cost of production.
Gross Profit 90,000
Less: Expenses
Selling & Distribution Cost 45,000
Admin Cost 20,000
Net Profit 25,000 Also Operating Profit or Profit before interest & Tax (PBIT)

Question 4
Gross Profit Margin = Gross Profit / Sales X 100
= 90,000 / 230,000 X 100
= 39.13% (D)

Question 5
Net/Operating Profit Margin = Net Profit / Sales X 100
= 25,000 / 230,000 X 100
= 10.87% (A)

Question 6
Asset Turnover = Sales/ Capital Employed
= $230,000 / $60,000
= 3.8 times ©

*Capital Employed Working

Capital Employed = Total Assets - Current Liabilities OR Equity + Non - Current Liabilities

Total Assets 90,000

Less Current Liabilites 30000
Capital Employed 60,000

Question 7
Return on Capital Employed (ROCE) = Profit Before Interest & Tax / Capital Employed X 100
= 25,000 / 60,000 x 100
= 42% (B)

Question 8
Residual Income $
Profit before interest & Tax 1,400,000 (Also knows as Net/Operating Profit)
Less Notional Interest
(*Capital employed x Cost of Capital)
($5,300,000 x 12%) 636,000 636000
Residual Income 764,000 (B)
*Capital Employed Working

Capital Employed = Total Assets - Current Liabilities OR Equity + Non - Current Liabilities

Total Assets
Non-Current Assets 5,000,000
Net Current Assets 900,000
Total Assets 5,900,000
Less Current Liabilites 600,000
Capital Employed 5,300,000
ore interest & Tax (PBIT)
Liabilities
Home - Work Questions 1, 2 & 3 (Word Document)
Answers

Q1. Capacity Utilization Ratio = Actual hours worked/Budgeted hours X 100

= 16000 hours / 15000 hours X 100
= 106.7% (A)

Q2. Efficiency Ratio = Standard hours for actual output/Actual hours worked X 100
= 18000 hours / 16000 hours X 100
= 112.5% ©

Question 3 - Summary Information

Standard hours: Item A = 2 hours to produce Item B = 1 hour to produce
Actual output: Item A = 7000 units Item B = 3000 units
Actual hours = 15000 hours
Budgeted hours = 16000 hours

Q3. Production Volume Ratio = Standard hours for actual output/budgeted hours X 100
= 17000 hours / 16000 hours X 100
= 106.3% (D)

*Standard hours for actual output

Item A = 2 hours x 7000 units = 14000 hours
Item B = 1 hour x 3000 units = 3000 hours
Standard hours for actual output is therefore = 17000 hours