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sir bpp revision kit pg no 24 and qustion no 81 i have doubt regarding the (a) stmt of profit and loss and the doubt goes in the calculation
revenue($16m*1.084) 17.344 m
cost of sales(17.344-5.203m) 12.141 ….how we get this part like revenue – 5.203 from where this number is calculated
then other expenses (5.203m-3.469) how we get this number
pls explain their calculation in detail
thank you
The first line of the question says that the revenue is $16M for the year just ended and that it will grow by 8.4% next year. So the revenue for next year will be 16M x 1.084 = 17.344M
The question also says that the gross profit margin for next year will be 30%.
Therefore the gross profit is 30% x revenue = 30% x 17.344 = 5.203M.The cost of sales is (as always) the difference between the revenue and the gross profit, and is therefore 17.344 – 5.203 = 12.141M
The question also says that the operating profit margin will be 20%.
Therefore the operating profit is 20% x revenue = 20% x 17.344 = 3.469M‘Other expenses’ is (as always) the difference between the gross profit and the operating profit.
Part (a) of this question is really testing from Paper FA (was Paper F3), but is certainly examined again in Paper FM 🙂
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