Theory question 110
Business CalculationsCommerce 2 (essay)
The following information relate to Jamiu & Co. Ltd. for the year ended 31st March, 2006 (₦):
Sales – 12,000
Opening stock – 3,000
Purchases – 7,000
Closing stock – 2,000
Wages – 500
Transport – 400
Electricity – 300
From the above figures, calculate (showing all workings) the
(a) cost of goods sold;
(b) net profit percentage;
(c) rate of turnover.
Show the model answer
Model answer
(a) Cost of goods sold = 3,000 + 7,000 − 2,000 = ₦8,000.
(b) Gross profit = 12,000 − 8,000 = ₦4,000; expenses = 500 + 400 + 300 = ₦1,200; net profit = ₦2,800; net profit percentage = 2,800 ÷ 12,000 × 100 ≈ 23.3%.
(c) Average stock = (3,000 + 2,000) ÷ 2 = ₦2,500; rate of turnover = 8,000 ÷ 2,500 = 3.2 times.
Explanation
Net profit percentage is worked out on sales.