1. Cost & Management Accounting
Problems In Preparation Of Financial Statements
Lecture-5
Mian Ahmad Farhan (ACA)

2. Income Statement Ratios
Gross Margin Rate
This ratio identify the ratio of gross margin over sales.
Example: 2,90,000 / 6,00,000 * 100 = 48.33%
Gross Profit
Sales
100

3. Income Statement Ratios
Gross Markup Rate
This ratio identify the ratio of gross margin over cost of goods sold.
Example: 2,90,000 / 3,10,000 * 100 = 93.5%
Gross Profit
COGS
100

4. Income Statement Ratios
Net Margin Rate
This ratio identify the ratio of gross margin over sales.
Example: 90,000 / 6,00,000 * 100 = 15%
Net Profit
Sales
100

5. Income Statement Ratios
Expense Ratio
This ratio identify the ratio of gross margin over sales.
Example: 50,000 / 6,00,000 * 100 = 8.33%
Expense
Sales
100

6. Problems
Sales = 8,00,000
Markup = 25% of cost
Calculate = COGS and Gross profit margin.

7. Problems
COGS = 50,000
GP Margin = 25% of sales
Calculate = Sales and gross profit margin

8. Problems
Gross profit = 40,000
GP Margin = 25% of cost
Calculate = Sales and cost of goods sold

9. Problems
Gross profit = 60,000
GP Margin = 25% of sales
Calculate = Sales and cost of goods sold

10. Practice Question Direct Material purchased Rs. 1,00,000
Direct Labor ,000
FOH ,000
Increase in material inventory ,000
Decrease in WIP inventory ,000
Increase in finish goods inventory 30,000
Prepare cost goods sold statement

11. Practice Question
Total factory cost ?
WIP opening ,000
WIP closing ,000
Finish goods opening ,000
Finis goods closing ,000
Cost of goods sold ,90,000
Find total factory cost

12. Practice Question
Opening material inventory Rs. 10,000
Closing material inventory ,000
Direct Labor ,000
FOH ,000
Total factory cost ,000
Calculate the value of purchase (25000)