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ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.29 : An engineering company that produces small biochemical tools applies Installment Sales Method in its accounting. Let A = Installment Sales, B = Cost of Installment Sales, C = Gross Profit, D = Gross Profit Ratio. In year 20X8, let A = $400, B = $250, C = $150. In year 20X9, let A = $450, B = $315, C = $135. If the value of D = 37.5 % in year 20X8 : (a) find the value of D for year 20X9; (b) calculate the realized gross profit = ED / 100, for year 20X8 when the cash collected from sales is E = $100.
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Answer Posted / kangchuentat
ACCOUNTING AND FINANCIAL ENGINEERING - ANSWER 34.29 : (a) By trial and error for year 20X8, D = 100 C / A = 100 ($150) / ($400) = 37.5 %. Applying the same formula for year 20X9 will produce D = 100 C / A = 100 ($135) / ($450) = 30 %. (b) Realized gross profit = ED / 100 = $100 (37.5 / 100) = $37.5. The answer is given by Kang Chuen Tat; PO Box 6263, Dandenong, Victoria VIC 3175, Australia; SMS +61405421706; chuentat@hotmail.com; http://kangchuentat.wordpress.com.
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