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P2-D2.
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- November 19, 2023 at 6:11 am #695091
Spyke Co’s results for the year ended 30 September 20X6 are shown below:
Revenue=8,600
Cost of sales=(5,200)
Gross profit=3,400During the year ended 30 September 20X7, Spyke Co expects its revenue to remain constant but expects the following changes to its cost of sales:
(1) On 1 October 20X6, Spyke Co lost its main supplier which offered goods at a discount of 10% in comparison to alternative suppliers. Spyke Co purchased $3.6m goods from the supplier during the year ended 30 September 20X6. These goods will still be required, and Spyke Co has acknowledged that it will need to bear any additional costs of alternative suppliers.(2) On 1 October 20X6, Spyke Co will replace rented plant with an annual rental of $600,000 a year, with new plant costing $2m (five-year life).
What is the estimated gross profit margin for Spyke Co for the year ended 30 September 20X7 after the expected changes to cost of sales have been accounted for?
A 37·7%
B 37·2%
C 41.9%
D 41·4%The answer is B
The new cost of goods is 4000 (3600/90*100) and GP is =(3400-400+200)/8600*100 but where are -400 and +200 coming from?November 25, 2023 at 10:19 pm #695505Hi,
I think the 400 comes from the additional cost of buying the goods in part (1) as we will no longer be getting the discount.
The other adjustment is comparing the annual rental that will no longer be paid to the depreciation now being charged ($2m over 5 years).
Thanks
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