Problems In Preparation Of Financial Statements Lecture-5BYAHSAN RIAZ SHEIKH

Gross Margin Rate

This ratio identify the ratio of gross margin over sales.

Example: 2,90,000 / 6,00,000 * 100 = 48.33%

Gross Profit

Sales 100

Gross Markup Rate

This ratio identify the ratio of gross margin over cost of goods sold.Example: 2,90,000 / 3,10,000 * 100 = 93.5%

Gross Profit

COGS 100

Net Margin Rate

This ratio identify the ratio of gross margin over sales.

Example: 90,000 / 6,00,000 * 100 = 15%

Net Profit

Sales 100

Income Statement Ratios

Expense Ratio

This ratio identify the ratio of gross margin over sales.

Example: 50,000 / 6,00,000 * 100 = 8.33%

Expense

Sales 100

Sales = 8,00,000Markup = 25% of cost Calculate = COGS and Gross profit margin.

COGS = 50,000GP Margin = 25% of sales Calculate = Sales and gross profit margin

Gross profit = 40,000GP Margin = 25% of cost Calculate = Sales and cost of goods sold

Gross profit = 60,000GP Margin = 25% of sales Calculate = Sales and cost of goods sold

Direct Material purchased Rs. 1,00,000Direct Labor 80,000FOH 70,000Increase in material inventory 10,000 Decrease in WIP inventory 5,000 Increase in finish goods inventory 30,000

Prepare cost goods sold statement

Total factory cost ?WIP opening 20,000WIP closing 10,000Finish goods opening 30,000Finis goods closing 50,000Cost of goods sold 1,90,000

Find total factory cost

Opening material inventory Rs. 10,000 Closing material inventory

5,000Direct Labor 30,000 FOH 20,000 Total factory cost 80,000

Calculate the value of purchase (25000)