Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › PERFORMANCE MEASUREMENT-CHASE CO
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
- AuthorPosts
- May 23, 2022 at 3:06 am #656223
Good day sir,I was doing this question and i’m confused on how the gross profit figure for yr 4 was calculated.
QUESTION
Sales price will start at $12 per unit for the first two years but then reduce by 5% per annum for each of the next two years.Gross profit will start at 40% but will reduce as the sales price reduces
The answer
y1 yr 2 yr 3 yr4
Sales (W1) 216,000 237,600 248,292 235,877
Gross profit (W2) 86,400 95,040 91,476 79,061WORKINGS
(1)Sales Year 1 Year 2 Year 3 Year 4
Sales volume (units) 18,000 1 9,800a 21,780b 21,7802)Gross profit
Year 1 40% (given) Total gross profit = $216,000 × 0.4 = $86,400
Year 2 40% (given) Total gross profit= $237,600 × 0.4 = $95,040
Year 3 35/95= 36.8421052% Total gross profit = $248,292 × 0.368421052 = $91,476
Year 4* 30.25/90.25= 33.5180055% Total gross profit = $235,877 × 0.335180055 = $79,061Pls I do not understand how 30.25/90.25 was calculated to get the gross profit figure for yr 4.Thanks
May 23, 2022 at 8:39 am #656239Suppose that the selling price was $100 initially. Therefore the cost would be $60.
By the end of the 4th year, the selling price will have fallen to 95% x 95% x $100 = $90.25.
The cost will still be $60, and therefore the profit will be $30.25.
May 23, 2022 at 5:10 pm #656267Thank you sir
May 23, 2022 at 8:18 pm #656279You are welcome 🙂
- AuthorPosts
- The topic ‘PERFORMANCE MEASUREMENT-CHASE CO’ is closed to new replies.