Introduction to Accounting: Financial Ratio Analysis Assignment

This assignment solution addresses key accounting concepts through the analysis of financial ratios. The solution provides a comprehensive overview of ratio calculations, including gross profit ratio, net profit ratio, current ratio, quick ratio, and stock turnover ratio. It includes detailed calculations and analysis of a company's financial performance, comparing data from 2019 and 2020. The assignment also covers cost accounting principles, including variable and fixed cost analysis, break-even point calculations, and product costing. The solution demonstrates the application of accounting principles to real-world scenarios, providing valuable insights into financial statement analysis and performance evaluation.

MN10248 Introduction to Accounting

Contents
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................3
Question 3...............................................................................................................................................5
Question 4...............................................................................................................................................6

Question 1
Question 2
Calculation of ratios
Gross profit ratio
Gross profit/net
sales*100
2019 2020
Gross profit 690 830
net sales 3100 2450

Gross profit ratio 22.26% 33.88%
Net profit ratio Net profit/sales*100
2019 2020
Net profit 172 204
net sales 3100 2450
Net profit ratio 5.55% 8.33%
Current ratio
Current
assets/current
liabilities
2019 2020
Current assets 470 1250
Current liabilities 290 510
Current ratio 1.62 times 2.45 times
Quick ratio
Quick assets/current
liabilities
2019 2020
Quick assets 280 610
Current liabilities 290 510
Quick ratio 0.97 times 1.20 times
Stock turnover
ratio
Cost of goods
sold/stock
2019 2020
COGS 2410 1620
Stock 190 640
Stock turnover
ratio 12.68 times 2.53 times
Analysis of performance:
Gross margin- In terms of gross margin, company’s performance has been increased in year 2020
compared to year 2019. This is so because of higher amount of gross profit in year 2020.
Net profit ratio- With rationale to such ratio, company is performing well for year 2020 compared to
year 2019. The reason is similar to previous ratio as company managed to produce higher net margin
due to lack of additional expenses.
Current ratio- The ideal current ratio is of 2:1 times. The company failed to manage such ideal form in
year 2019 as it was of 1.62:1 times. Though, in year 2020 they managed such ratio higher which leads to
effective liquidity condition.

Quick ratio- The ideal quick ratio is of 1.5:1 times. The company failed to manage such ideal form in year
2019 as it was of 0.97:1 times. Though, in year 2020 they managed such ratio higher due to lack of
current liabilities.
Stock turnover ratio- The Company managed to effective stock turnover ratio for year 2019 compared to
year 2020. This is so because of effective cost of sales in year 2019 as well as lack of stock level.
Question 3
Part I
(a)
Sales 1140000
Less: Variable cost 568000
direct material
costs 320000
direct labor costs 248000
Contribution 572000
Less: Fixed cost 120000
Profit 452000
(b)
Fixed cost 420000
Variable cost 155000
Estimated profit 87000
662000
Units 6000
Price 110.33
Part II
A R C
Sales 466050 512500
106500
0
Less: Labor cost 98280 57400 252000
Less: machine hour
cost 137280 351780 511500
Less: Variable cost 40950 57400 225000
Contribution 189540 45920 76500
Less: Fixed cost 145000 145000 145000
44540 -99080 -68500

Question 4
(a)
A B C
Rent of building 22850.34487 95659.239
38941.50
4
Light and heat cost 180000 180000 180000
Building insurance 90000 90000 90000
292850.34 365659.24
308941.5
0
(b)
Average wage rate per hour in department C
Full cost of unit: 1590.4
Calculation of each product's cost for department C:
C department
Product X 353.36
Product Y 212.01
Product Z 138.27
Average wage rate per hour in department C: 212.01/7.5
= 28.26 Pounds