Express the ratio of the Gross Profit of Year 1 to the Cost of Goods Sold of Year 2 in fraction form.
What fraction can you arrive at if you compare the Administrative Expenses of Year 1 to its Year 2?
What would be the difference if you subtract your answer from letter a to your answer from letter b?
What fraction can you arrive if you will compare the Selling and Operating expenses of Year 2 to the Net Sales of Year 1?
Express the ratio of Year 1 Selling and Operating Expense to the Administrative Expense of the same year in fraction form.
What would be the product of the answers for letters c and d?
| ABM Company | Year 1 | Year 2 |
|---|---|---|
| Net Sales | 550,000.00 | 700,000.00 |
| Cost of Goods Sold | 295,000.00 | 205,000.00 |
| Gross Profit | 255,000.00 | 495,000.00 |
| Less: Administrative Expense | 95,000.00 | 105,000.00 |
| Selling and Operating Expense | 20,000.00 | 40,000.00 |
Answer (1)
Let's solve each part of the question step by step.
a) Express the ratio of the Gross Profit of Year 1 to the Cost of Goods Sold of Year 2 in fraction form.
Year 1 Gross Profit = $255,000.00
Year 2 Cost of Goods Sold = $205,000.00
The ratio is expressed as: Ratio = 205 , 000 255 , 000 This simplifies to: 41 51
b) What fraction can you arrive at if you compare the Administrative Expenses of Year 1 to its Year 2?
Year 1 Administrative Expense = $95,000.00
Year 2 Administrative Expense = $105,000.00
The fraction is: 105 , 000 95 , 000 This simplifies to: 21 19
c) What would be the difference if you subtract your answer from letter a to your answer from letter b?
Subtract the fractions from part a and part b: 41 51 − 21 19 To subtract, find a common denominator: 41 × 21 51 × 21 − 21 × 41 19 × 41 = 861 1071 − 861 779 = 861 292 This simplifies to: 59 4
d) What fraction can you arrive if you will compare the Selling and Operating expenses of Year 2 to the Net Sales of Year 1?
Year 2 Selling and Operating Expense = $40,000.00
Year 1 Net Sales = $550,000.00
The fraction is: 550 , 000 40 , 000 This simplifies to: 55 4
e) Express the ratio of Year 1 Selling and Operating Expense to the Administrative Expense of the same year in fraction form.
Year 1 Selling and Operating Expense = $20,000.00
Year 1 Administrative Expense = $95,000.00
The ratio is: 95 , 000 20 , 000 This simplifies to: 19 4
f) What would be the product of the answers for letters c and d?
Multiply the fractions from parts c and d: 59 4 × 55 4 = 3245 16 This is already in its simplest form.
The calculations illustrate the comparisons and calculations between different financial metrics in fraction form, showing their relationships and offering insights into the business's financial operations.
