Mock Paper

MOCK PAPER

TABLE OF CONTENTS
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
REFERENCES................................................................................................................................2

Question 1
Q1.Gross profit in 2020= Sales-(Cost of sales)=66500-(12800)=53700
Net profit=Gross profit-expenses=53700-(11000+16000+14000)=12700
Gross profit in 2019=Sales-(Cost of sales+ other costs)=83000-(23000)=60000
Net profit=Gross profit-expenses=60000-(5000+17000+13000)=25000
Q2. Gross profit to Sales ratio in 2020=53700/66500=0.80
Gross profit to sales ratio in 2019=60000/83000=0.72
Net profit to sales ratio in 2020= 12700/66500=0.19
Net profit to sales ratio in 2019=(25000/83000)=0.30
The ratios are important as they denote how much the company has been able to make profit out
of sales through gross and net profit and how much it has been able to control operating costs.
These ratios are also important from investors’ point of view before making decisions to invest
(Nariswari and Nugraha, 2020).
Q3. The company has been able to manage the cost of sales and other costs but has not been able
to increase revenue which is a cause of declining profits and cash flow problems.
Q4. Strategies to improve financial position:
a) Company has to gain control over operational costs.
b) Company has to follow inventory module of just in time to avoid wastage.
c) Company can use fixed assets as value for earning sources like warehouse for storage.
Question 2
Q1.) Break even point(units)=Fixed costs/(Sales price per unit-Variable costs per
unit)=315000/(200-60)=315000/140=2250.
Break even(sales)=Fixed costs/Contribution margin=315000/(200-60)/200=450000
Here, contribution margin=sales per unit-variable cost per unit/sales per unit