Partial information from Income Statement: Sales Revenue $50,000,000 Cost of Goo
ID: 2331145 • Letter: P
Question
Partial information from Income Statement:
Sales Revenue $50,000,000
Cost of Goods Sold (COGS) $35,000,000
(Direct Material = 40%, Labor and overheads = 60%)
Selling & Marketing Expenses $ 500,000
General Administrative Expenses $ 2,000,000
Partial information from Balance Sheet:
Inventory (Direct Material 50%, Work-in-progress and Finished Goods) $10,000,000
Other Assets (Machinery, Computers, Buildings etc.) $25,000,000
Notes: Assume that (i) Direct Material portion of Cost of Goods Sold is about 40%, and (ii) Direct material portion of Inventory as appeared in Balance Sheet is about 50%.
Based on the above limited financial information gathered from Balance Sheet and Income Statement:
1. Calculate following financial and operational measures as we have discussed in the class:
(i) Throughout,
(ii) Inventory,
(iii) Operating Expenses,
(iv) Net Profit, and
(v) Return on Inventory
2. Prepare Throughput Accounting Income Statement
Explanation / Answer
1 Throughput = Sales Revenue-variable cost i.e direct material = 50000000-40% of 35000000 36000000 2 Operating Exp. = All Expenses except direct material cost Labour and Overhead 21000000 Selling and Marketing Exp. 500000 General Admistrative Exp. 2000000 Total Operating Exp. 23500000 3 Net Profit= througout-operating exp. 12500000 4 Return on Investment = Net Profit/Direct material Cost i.e called Investment here or Return on Inventory = 12500000/14000000 0.89 or 89% 5 Closing Stock as per balance sheet(According to throughput) 50% of 10000000 5000000