To determine the profit of the Asa branch of Emene Company Ltd for the period ended 31/12/94, we need to follow a series of steps to calculate the profit based on the sales, markup, and expenses. Let's break this down step-by-step.
Step 1: Understand the Sales and Markup
The sales made by the Asa branch amount to
N549,000. The goods were sold at a
22% markup.
Markup is the amount added to the cost price of goods to cover overhead and profit. The formula for calculating the cost price (CP) from sales (S) and markup percentage (M) is:
[
\text{Sales} = \text{Cost Price} + \text{Markup}
]
Where:
[
\text{Markup} = \text{Cost Price} \times \frac{\text{Markup Percentage}}{100}
]
This can be rearranged to find the cost price:
[
\text{Sales} = \text{Cost Price} + \left(\text{Cost Price} \times \frac{\text{Markup Percentage}}{100}\right)
]
[
\text{Sales} = \text{Cost Price} \times \left(1 + \frac{\text{Markup Percentage}}{100}\right)
]
Step 2: Calculate the Cost Price
Using the sales figure and the markup percentage, we can calculate the cost price:
[
\text{Cost Price} = \frac{\text{Sales}}{1 + \frac{\text{Markup Percentage}}{100}}
]
Substituting the values:
[
\text{Cost Price} = \frac{549,000}{1 + \frac{22}{100}} = \frac{549,000}{1.22} \approx 450,000
]
Step 3: Calculate the Profit
Profit can be calculated using the formula:
[
\text{Profit} = \text{Sales} - \text{Cost Price} - \text{Expenses}
]
We already have the sales (N549,000), the cost price (N450,000), and the branch expenses (N34,400). Now we can substitute these values into the profit formula:
[
\text{Profit} = 549,000 - 450,000 - 34,400
]
Calculating this step-by-step:
-
Sales - Cost Price:
[
549,000 - 450,000 = 99,000
]
-
Subtract Expenses:
[
99,000 - 34,400 = 64,600
]
Thus, the profit of the branch for the period is
N64,600.
Step 4: Evaluate the Options
Now, let's evaluate the options provided:
- A. N6,500: This is too low and does not reflect the calculations we performed.
- B. N64,600: This is the correct answer based on our calculations.
- C. N85,380: This figure does not match our calculations and seems to be an incorrect interpretation of profit.
- D. N514,600: This figure represents sales minus expenses but does not account for the cost of goods sold, making it incorrect.
Summary of Key Points
- The profit is calculated by subtracting both the cost of goods sold and branch expenses from total sales.
- The cost price is derived from sales using the markup percentage.
- The correct profit for the Asa branch is N64,600.
- Always ensure to account for all components (sales, cost price, and expenses) when calculating profit.
Revision Summary
- Sales: N549,000
- Markup: 22% leads to a cost price of approximately N450,000.
- Expenses: N34,400
- Profit Calculation: Profit = Sales - Cost Price - Expenses = N64,600.