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Keyless Locksmiths Pty Ltd Revenue statement for the year ended 30 June 2001 Sales Less cost of goods sold Opening stock Purchases Less closing stock Gross profit Less selling expenses Advertising Salaries Less administrative expenses Telephone Rental Net profit (a) Calculate the gross profit ratio for 2001 - HSC - SSCE Business Studies - Question 22 - 2001 - Paper 1
Question 22
Keyless Locksmiths Pty Ltd Revenue statement for the year ended 30 June 2001 Sales Less cost of goods sold Opening stock Purchases Less closing stock Gross profit L... show full transcript
Worked Solution & Example Answer:Keyless Locksmiths Pty Ltd Revenue statement for the year ended 30 June 2001 Sales Less cost of goods sold Opening stock Purchases Less closing stock Gross profit Less selling expenses Advertising Salaries Less administrative expenses Telephone Rental Net profit (a) Calculate the gross profit ratio for 2001 - HSC - SSCE Business Studies - Question 22 - 2001 - Paper 1
Step 1
Calculate the gross profit ratio for 2001.
Answer
To calculate the gross profit ratio, first determine the gross profit.
Gross Profit Calculation:
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Sales (2001): $150,000
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Cost of Goods Sold (COGS) = Opening Stock + Purchases - Closing Stock
- Opening Stock: $48,000
- Purchases: $87,000
- Closing Stock: $90,000
- COGS = 87,000 - 45,000
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Gross Profit = Sales - COGS
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Gross Profit = 45,000 = $105,000
Gross Profit Ratio Calculation: The gross profit ratio is calculated as: ext{Gross Profit Ratio} = rac{ ext{Gross Profit}}{ ext{Sales}}
- Gross Profit Ratio = ( rac{105,000}{150,000} ) = 0.7, or 70%.
Step 2
State TWO possible reasons for the change in profitability.
Answer
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Increased Selling Expenses: There could have been a rise in selling expenses, such as advertising and salaries, which can eat into the profits and reduce the net profit ratio.
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Increased Administrative Expenses: Higher administrative costs related to operations, including telephone and rental costs, can also impact profitability, contributing to a lower net profit margin.
Step 3
Propose and justify TWO marketing strategies that Keyless Locksmiths Pty Ltd could adopt to improve their profitability.
Answer
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Social Media Marketing: Utilizing social media platforms to promote services and engage with customers can increase brand awareness and customer reach, potentially leading to higher sales. Targeted ads can also be used to attract local clientele, which would reduce overhead costs compared to traditional marketing methods.
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Loyalty Programs: Implementing loyalty programs that reward repeat customers can enhance customer retention. By encouraging customers to return for services, the business can stabilize revenue sources and reduce marketing costs associated with acquiring new customers.