Financial Management Accounting [Online Exam]

FINANCIAL
MANAGEMENT
ACCOUNTING [ONLINE
EXAM]

Table of Contents
Question: 1.......................................................................................................................................3
1.1 Gross and net profit...........................................................................................................3
Gross and net profit ratio.............................................................................................................3
Reason behind declining profit and increasing cash flow problems...........................................4
Strategic recommendations..........................................................................................................4
Question: 2.......................................................................................................................................5
Breakeven point of production....................................................................................................5
Company to set profitable sales revenue target...........................................................................5
Switch to activity based costing..................................................................................................5
Question: 3.......................................................................................................................................6
Calculation of three significant variances between budgeted and outrun figures.......................6
Causes of variances......................................................................................................................6
Consequences for the business and objectives of the business in calculating variances.............7
Strategies for correcting and eliminating above variances..........................................................7
Evaluating advantages and disadvantages of switching from incremental based budgeting to
zero based budgeting...................................................................................................................7
REFERENCES................................................................................................................................9

Question: 1
1.1 Gross and net profit
Particular 2020 2019
Sales 365000 530000
Less:
Cost of sales (128000) (230000)
Gross profit 237000 300000
Less
Labour cost (110000) (100000)
Warehousing cost (30000) (10000)
Other overhead cost (70000) (80000)
Net profit 27000 110000
Gross and net profit ratio
Gross profit ratio:
Gross profit ÷ sales * 100
2020
= 237000 ÷ 365000 * 100
= 64.93%
2019
= 300000 ÷ 530000 * 100
= 56.60%
Net profit ratio:
Net profit ÷ sales * 100
2020
= 27000 ÷ 365000 * 100