Financial Performance  Sample assessment 1  task 7a
Reme
Posts: 19Registered
You have been provided with the following information involving a company which operates an absorption costing system.
Scenario 1
Sales volume (units)  120000
Revenue  1680000
Gross profit  600000
profit from operations  275000
net assets  2298400
inventory  147950
Calculate the following performance indicators
Return on net assets  11.96
Inventory holding period in days  50
Sales price per unit  14
Full production cost per unit  ?????
Can somebody pls help in finding out the full production cost per unit?
It should be direct material + direct labour + direct overheads
So I have calculated:
(revenue  profit from operations)/sales volume
(1680000  275000)/120000 = 11.71
However the correct answer is 9
Please help!
Scenario 1
Sales volume (units)  120000
Revenue  1680000
Gross profit  600000
profit from operations  275000
net assets  2298400
inventory  147950
Calculate the following performance indicators
Return on net assets  11.96
Inventory holding period in days  50
Sales price per unit  14
Full production cost per unit  ?????
Can somebody pls help in finding out the full production cost per unit?
It should be direct material + direct labour + direct overheads
So I have calculated:
(revenue  profit from operations)/sales volume
(1680000  275000)/120000 = 11.71
However the correct answer is 9
Please help!
Best Answers

tinkerbell0406 Posts: 51Ok, take you gross profit from your sales revenue and divide sales volume and it 9. Gross profit less revenue gives you cost of sales. Hope this helps

Reme Posts: 19Oh gosh, sometimes we make it difficult! thank you for your reply
I have aslo issues in working out the below one which is the part b of the same question. Can you pls help again?
Net assets  gbp 175000
Return on net assets  13%
Profit margin  14%
Gearing  32.75%
Profit to the nearest gbp  ???
Sales revenue to the nearest gbp  ??? 
DSV_Accounting Posts: 5Return on NA = Net Profit / NA
Therefore:
Net Profit = NA x Return on NA
= 175,000 x 13%
= £22,750.
Profit margin = Net Profit / Sales revenue
Therefore:
Sales Revenue = Net Profit / Profit margin
= £22,750 / 14%
= £162,500.
See if you can lookup 'rearranging formulae' or similar in maths.