• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

New! BPP Books for ACCA September 2022 Exams are now available, get your discount code >>

Receivable management

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Receivable management

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 31, 2021 at 4:06 pm #622466
    Nikitagarwal
    • Topics: 154
    • Replies: 146
    • ☆☆☆

    Hello Sir,
    Can you please explain me how did they calculated the contribution/sales ratio in the below question of BPP Study kit:
    Grabbit Quick Co achieves current annual sales of $1,800,000. The cost of sales is 80% of this amount,
    but bad debts average 1% of total sales, and the annual profit is as follows.
    $
    Sales 1,800,000
    Less cost of sales 1,440,000
    360,000
    Less bad debts 18,000
    Profit 342,000
    The current debt collection period is one month, and the management consider that, if credit terms were
    eased (Option A), the effects would be as follows.
    Present policy Option A
    Additional sales (%) – 25%
    Average collection period 1 month 2 months
    Bad debts (% of sales) 1% 3%
    The company requires a 20% return on its investments. The costs of sales are 75% variable and 25%
    fixed. Assume there would be no increase in fixed costs from the extra revenue and that there would be no
    increase in average inventories or accounts payable. Which is the preferable policy, Option A or the
    present one?

    June 1, 2021 at 7:29 am #622544
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    For every $100 sales, the cost of sales is $80.

    Of this $80, the variable cost is 75% x 80 = $60.

    Therefore the contribution is $40 for every $100 of sales.

    Therefore the CS ratio is 40/100 = 40%

    June 1, 2021 at 2:00 pm #622641
    Nikitagarwal
    • Topics: 154
    • Replies: 146
    • ☆☆☆

    got it.. thanks sir 🙂

    June 1, 2021 at 4:48 pm #622666
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • mannannagpal on Sources of data – ACCA Management Accounting (MA)
  • mannannagpal on Sources of data – ACCA Management Accounting (MA)
  • John Moffat on Discounted Cash Flow Further Aspects, Lease versus Buy – ACCA Financial Management (FM)
  • John Moffat on The valuation of securities – The valuation of equity – ACCA Financial Management (FM)
  • John Moffat on Objectives of organisations – ACCA (AFM) lectures

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy