Accounting for Managers: Interpreting accounting information for decision-making

QUESTIONS 387

Current year Previous year

Return on (shareholders’) investment (ROI)

net profit after tax

shareholders’ funds

193. 4

2 , 610. 1

7.4%

251. 9

2 , 547. 0

9.9%

Return on capital employed (ROCE)

net profit before interest and tax

shareholders’ funds+long-term debt

367. 3

2 , 610. 1 + 1 , 770

8.4%

394. 7

2 , 547 + 1 , 537. 7

9.7%

Net profit/sales

net profit before interest and tax

sales

367. 3

1 , 681. 6

21.8%

394. 7

1 , 566. 6

25.2%

Working capital

current assets

current liabilities

613. 3

1 , 444

42.5%

475. 3

1 , 089. 2

43.6%

Gearing ratio

long-term debt

shareholders’ funds+long-term debt

1 , 770

2 , 610. 1 + 1 , 770

40.4%

1 , 537. 7

2 , 547 + 1 , 537. 7

37.6%

Interest cover

profit before interest and tax

interest payable

367. 3

161. 1

2.28

394. 7

120. 7

3.27

Debtors’ collections

debtors

average daily sales

414. 7

1 , 681. 6 / 365 = 4. 607

90

353. 8

1 , 566. 6 / 365 = 4. 292

82.4

Asset turnover

sales

total assets

1 , 681. 6

5 , 304. 5 + 613. 3

28.4%

1 , 566. 6

4 , 794. 6 + 475. 3

29.7%

Questions for Chapter 8

8.1 Plastic Emoluments has a relevant range between 100,000 and 200,000 units,
fixed costs are £645,000 and variable costs are £7 per unit. Calculate the average
costs at a production volume of each of 100,000, 150,000 and 200,000 units.

8.2 Hilltop Solutions has a planned level of activity of 150,000 units, fixed costs
are £300,000 and variable costs are £7 per unit. The actual production volume is
140,000 units.
Identify the:

žstandard cost per unit;