Accounting – 6.1 Calculation and understanding of accounting ratios | e-Consult
6.1 Calculation and understanding of accounting ratios (1 questions)
Login to see all questions.
Click on a question to view the answer
Calculate Total Cost of Goods Sold:
Total Cost of Goods Sold = Cost of Materials + Direct Labour + Factory Overheads
Total Cost of Goods Sold = £30,000 + £20,000 + £10,000 = £60,000
Gross Profit Calculation:
Gross Profit = Sales Revenue - Total Cost of Goods Sold
Gross Profit = £120,000 - £60,000 = £60,000
Gross Profit Margin Calculation:
Gross Profit Margin = (Gross Profit / Sales Revenue) x 100
Gross Profit Margin = (£60,000 / £120,000) x 100 = 50%
Answer: The gross profit for Precision Parts is £60,000 and the gross profit margin is 50%.