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1) Are interest on capital and carriage inwards holding costs?
2) The following ratios have been budgeted for an investment centre with net assets of 1,200,000.
Net asset Turnover 3.6 times
Gross Profit Margin 36.5%
Non Production Costs to sales 27.9%what is the budgeted operating profit for the investment centre?
A) 118,667
B) 427,200
C) 28,667
D) 371,5203) A divisional manager controls assets valued at 600,000 .Other assets valued at 100,000 are traceable to the division but not controllable by the divisional manager. the controllable profit for the division for a period is 80,000. The head office uses an imputed interest rate of 8% in calculating residual income. whats the RI?
Surely you have the answers to these questions in whichever book you found the questions??? You should use this forum to ask about problems you have understanding the answers!!
1. Interest is a holding cost, carriage inwards is not.
2. If the assets are 1.2M then the turnover is 3.6 x 1.2M.
The gross profit is 36.5% of the turnover. The operating profit is the gross profit less 27.9% of the turnover.
3. 80,000 – (8% x 600,000)I do suggest that you watch our free lectures – they are a complete course for Paper F2 and cover everything you need to be able to pass the exam well.
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