Prepare the common size revenue statement with amount and percentage in vertical form suitable for analysis.
Understand the Problem
The question is asking to prepare a common size revenue statement using the provided income statement details, including amounts and percentages in a vertical format for analysis.
Answer
Common size revenue statement formatted with amounts and percentages suitable for analysis.
Answer for screen readers
Common Size Revenue Statement for M/s Star Ltd.
Particular Amount Percentage
------------------------------------------------------------
By Sales 1,000,000 100.00%
To op. stock of finished goods 200,000 20.00%
To material consumed 600,000 60.00%
To wages 125,000 12.50%
To factory overhead 12,500 1.25%
To staff salaries 17,500 1.75%
To telephone charges 10,000 1.00%
To directors fees 10,000 1.00%
To depreciation on furniture 32,500 3.25%
To advertisement 12,000 1.20%
To free sample 5,000 0.50%
To publicity exp 80,000 8.00%
To interest on debenture 5,000 0.50%
To interest on loan 5,000 0.50%
To Net Profit 183,000 18.30%
------------------------------------------------------------
Total Expenses 360,000 36.00%
Steps to Solve
-
Identify Total Revenue
The total revenue (or sales) is given as $1,000,000$. -
List All Expenses and Their Amounts
From the income statement, list all the expenses along with their respective amounts:- To op. stock of finished goods: $200,000$
- To material consumed: $600,000$
- To wages: $125,000$
- To factory overhead: $12,500$
- To staff salaries: $17,500$
- To telephone charges: $10,000$
- To directors fees: $10,000$
- To depreciation on furniture: $32,500$
- To advertisement: $12,000$
- To free sample: $5,000$
- To publicity exp: $80,000$
- To interest on debenture: $5,000$
- To interest on loan: $5,000$
- To net profit: $183,000$
- Total Expenses: $360,000$
-
Calculate Percentages
For each item, calculate the percentage of the total revenue using the formula: $$ \text{Percentage} = \left( \frac{\text{Amount}}{\text{Total Revenue}} \right) \times 100 $$
Calculate the percentage for each item listed. -
Prepare Common Size Revenue Statement
Format the results in a vertical layout with amounts and percentages, displaying each expense as a percentage of total revenue.
Common Size Revenue Statement for M/s Star Ltd.
Particular Amount Percentage
------------------------------------------------------------
By Sales 1,000,000 100.00%
To op. stock of finished goods 200,000 20.00%
To material consumed 600,000 60.00%
To wages 125,000 12.50%
To factory overhead 12,500 1.25%
To staff salaries 17,500 1.75%
To telephone charges 10,000 1.00%
To directors fees 10,000 1.00%
To depreciation on furniture 32,500 3.25%
To advertisement 12,000 1.20%
To free sample 5,000 0.50%
To publicity exp 80,000 8.00%
To interest on debenture 5,000 0.50%
To interest on loan 5,000 0.50%
To Net Profit 183,000 18.30%
------------------------------------------------------------
Total Expenses 360,000 36.00%
More Information
A common size revenue statement expresses each line item as a percentage of total revenue, allowing for easy comparison and analysis across different periods or companies. This format is useful for identifying the proportion of expenses related to sales.
Tips
- Incorrect Totals: Mistakes often occur in adding the total revenue or total expenses. Double-check calculations.
- Percentage Miscalculations: Ensure to use the total revenue as the denominator for all percentage calculations.
- Formatting Issues: When presenting the final statement, ensure proper alignment and labeling for clarity.
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