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Hi Sir
I did not understand the working of gross profit for year 2011 an 2012
why 5 is subtracted from 40 and then divided by .95 for year 2011 and also for 2012 although the
decrease in gross profit is by 5 %
kindly please explain these workings for 2011 and 2012
Thank youGross profit: (Revenue-COS)/Revenue.
Numerator decreases for 5%, thus you have 5% subtraction from 40% (2010 margin given).
Denominator decreases by 5%, revenue in 2011 is 95% of revenue in 2010.I prefer alternative method – I calculate variable costs (they are constant per unit), and subtract COS from Revenue.
Thank you Katerina but sadly I didnot understand 🙁
ok i did understand till the subtraction of 5 from numerator but afterwords it has passed over my head
and did u mean to say that revenue in 2012 is 95% of the revenue in 2011 ? what about 2010 and 2011
Thanks in advance May God bless u 🙂Question says: “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.”
So revenue in view of gross profit margin is 95% (2012 compared to 2011 and 2011 compared to 2010).
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