Online Finance Exam

ONLINE FINANCE EXAM

TABLE OF CONTENTS
QUESTION- 1...........................................................................................................................................3
1) Calculation of the gross profit and the net profit of the company........................................................3
2) Calculation of the gross profit and the net profit ratio.........................................................................3
3) Reasons for the declining profit and increasing cash flow problems...................................................4
4) Recommendations...............................................................................................................................5
QUESTION- 2...........................................................................................................................................5
1) Calculation of the breakeven point......................................................................................................5
2) Setting the revenue targets as one of the significant advantages of breakeven analysis.......................5
3) Advantages and disadvantages of Activity based costing....................................................................6
QUESTION- 3...........................................................................................................................................6
1) Calculation of the significant variances...............................................................................................6
2) Causes of these variances....................................................................................................................7
3) Consequences of variances on the business and its objectives............................................................7
4) Strategies for elimination of variances................................................................................................7
5) Zero based budgeting..........................................................................................................................7

QUESTION- 1
1) Calculation of the gross profit and the net profit of the company
PARTICULARS AMOUNT
2019 2020
Sales Turnover 530000 365000
Less Cost of Sales -230000 -128000
Less Direct Labor Cost -100000 -110000
Gross Profit 200000 127000
Less Warehousing Costs -10000 -30000
Less Other Overheads -80000 -70000
Net Profit 110000 27000
It can be ascertained from the above table that the gross profit and the net profit both are
showing the declining trend in the years 2019 and 2020. Due to some inefficiencies pertaining in
the business the company is not able to generate operational efficacies and this is the reason that
the profitability of the company has significantly dropped.
2) Calculation of the gross profit and the net profit ratio
Gross profit ratio= Gross profit / Sales turnover*100