To calculate the net profit from the provided financial data, we need to follow a systematic approach. Let's break down the steps involved in calculating the net profit, and then we will analyze the options provided.
Step-by-Step Calculation of Net Profit
- Identify the Key Figures:
- Net Sales: ₦370,000
- Cost of Goods Sold (COGS): ₦230,000
-
Rent Expenses: ₦35,000
-
Calculate Gross Profit:
Gross Profit is calculated by subtracting the Cost of Goods Sold from Net Sales.
[
\text{Gross Profit} = \text{Net Sales} - \text{COGS}
]
Substituting the values:
[
\text{Gross Profit} = ₦370,000 - ₦230,000 = ₦140,000
]
-
Calculate Net Profit:
Net Profit is calculated by subtracting all operating expenses (in this case, only rent expenses) from Gross Profit.
[
\text{Net Profit} = \text{Gross Profit} - \text{Rent Expenses}
]
Substituting the values:
[
\text{Net Profit} = ₦140,000 - ₦35,000 = ₦105,000
]
Final Answer
The calculated net profit is
₦105,000. Therefore, the correct option is
C. ₦105,000.
Explanation of Other Options
-
Option A: ₦35,000: This amount does not reflect any logical calculation based on the provided figures. It seems to ignore the gross profit calculation entirely.
-
Option B: ₦115,000: This option could arise from an incorrect subtraction of expenses or miscalculation of gross profit. It does not align with the correct calculations we performed.
-
Option D: ₦40,000: Similar to option A, this figure does not correspond to any logical step in the calculation process. It appears to be a random figure without basis in the provided data.
Common Pitfalls
- Ignoring Expenses: A common mistake is to forget to subtract all operating expenses from gross profit, leading to an inflated net profit figure.
- Miscalculating COGS: Ensure that the COGS is accurately derived from the cost of goods available for sale minus the ending inventory.
- Confusing Gross Profit with Net Profit: Remember that gross profit is before expenses, while net profit is after all expenses have been deducted.
Revision Summary
- Net Profit Calculation: Net Profit = Gross Profit - Total Expenses.
- Gross Profit Calculation: Gross Profit = Net Sales - Cost of Goods Sold.
- Key Figures: Always identify and use the correct figures from the financial data.
- Double-Check Calculations: Always verify each step to avoid common mistakes in financial calculations.
By following these steps and understanding the reasoning behind each calculation, you can confidently approach similar questions in your exams.