Good morning John, Mike and the forum members,
I find myself stuck on the following Profitability Ratio question
2009 2008
Total Production Costs £6,538,000 £5,082,000
Gross Profit £3,006,000 £2,582,000
Profit from Operations £ 590,000 £ 574,000
Total capital employed £6,011,000 £5,722,000
Revenue (Total prod cost + Gross Profit) £9,544,000 £7,664,000
I'm struggling to calculate how the production costs have increased at a rate of 28.7% year on year.
I would be grateful if you would kindly assist me by outlining the steps that I would need to take to arrive at 28.7%.
Thank you. I'm grateful.
Ask the Tutor ACCA MA
F2 - Performance Management - Profitability Ratios Query
10y ago#1The production costs have increased by 6538000 - 5082000 = 1,456,000
Since it was 5,082,000 last year, the percentage increase = 1,456,000 / 5,082,000 = 28.7%
Thank you John. I'm grateful.
I was also going to ask for your assistance with an explanation of the increase in revenue of 24.6%
However, If I were to apply your method above:
Increase in revenue:
2009 £9,544,000
2008 £7,664,000
So: £9,544,000 - £7,664000 = £1,880,000
Since the revenue was £7,664,000 for 2008
The percentage increase = £1,880,000 / £7,664,000 = 0.245 *100 = 24.530 = 24.6%
Thanks again John. Gratefully appreciated
10y ago#3You are very welcome :-)
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