ASSIGNMENT

Assignment



Task 2:

Comment on TGGC's profitability, liquidity and financial position and how it has changed over the two years and include comparisons with the industry as a whole from figures provided. Your report should include calculations of the following ratios for the two years:

a. Return on Capital Employed

b. Net Profit %

c. Quick Ratio/Acid Test

d. Gearing

Gross Profit Margin = Gross Profit X 100

Sales

For 2010

Gross Profit Margin = 1,265 x 100

2,300

Gross Profit Margin = 0.55 x100

Gross Profit Margin = 55 %

For 2009

Gross Profit Margin = 1,155 x100

2,100

Gross Profit Margin = 0.55 x 100

Gross Profit Margin = 55%

Net Profit Margin = Operating Profit X 100

Sales

For 2010

Net Profit Margin = 552 x100

2,300

Net Profit Margin = 0.24 x 100

Net Profit Margin = 24%

Where as: Industrial average is : 21.4%.

For 2009

Net Profit Margin = 462 x100

2,100

Net Profit Margin = 0.22 x100

Net Profit Margin = 22%

Where as: Industrial average is: 21.3%.

Acid Test Ratio = Quick Assets x100

Current liabilities

For 2010

Acid Test Ratio = 570 x100

475

Acid Test Ratio = 1.2: 1

Where as: Industrial average is: 1.0:1

For 2009

Acid Test Ratio = 372 x100

465

Acid Test Ratio = 0.8: 1

Where as: Industrial average is: 0.9:1

Return on Capital Employed = Operating Profit X 100 Net Assets

For 2010

Return on Capital Employed = 552 x100

3680

Return on Capital Employed = 0.15 x100

Return on Capital Employed = 15 %

Where as: Industrial average is 9.6%.

For 2009

Return on Capital Employed = 462 x100

3,300

Return on Capital Employed = 0.14 x100

Return on Capital Employed = 14%

Where as: Industrial average is 9.4%.

Gearing = Debt X 100 Capital Employed

For 2010

Gearing = 2,129 x100

3,680

Gearing = 0.57 x 100

Gearing = 57%

Where as: Industrial average is: 36%.

For 2009

Gearing = 2,955 x100

3,300

Gearing = 85%

Where as: Industrial average is: 37%.

Task 3:

The Green Garden Company has also experimented with a revolutionary fertiliser for potted plants and have provided you with the following costing information to calculate a unit cost per 5 kg packet and subsequently to determine a selling price for the product. There is no competition to this product within the UK and the formula has been patented for 7 years. There are several large outlets enquiring about the price and availability of the product in outside of TGGC's normal sales area. The management have requested that you calculate the unit cost per packet and determine a price per packet for general sale to the public together with your rationale for setting the price at that level.

Material Costs 15,000 kgs at £4,380.00

Labour 450 direct hours at £5,120.00

Overheads are absorbed at the rate of £10.30 per direct hour worked

We have,

Total Cost = Material cost + Direct labour + Factory Overhead

Total Cost = 4,380 + 5,120 + (10.30 x 450)

Total Cost = 4,380 + 5,120 + 4,635

Total Cost = £ 14,135

So, we know the total cost of revolutionary fertiliser for potted plants is £ 14,135. For calculating the per bag cost of the revolutionary fertilizer for potted plants we will do the following steps:

15,000 Kgs bag = £ 14,135

So, for 1 Kg bag = ...