This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
Step 1: Identify the relevant data for Sales and Profit for both years. Year 2003: Sales = N225,000 Profit = N20,000 Year 2004: Sales = N285,000 Profit = N35,000 Step 2: Calculate the change in Sales. Change in Sales = Sales (2004) - Sales (2003) Change in Sales = N285,000 - N225,000 = N60,000 Step 3: Calculate the change in Profit. Change in Profit = Profit (2004) - Profit (2003) Change in Profit = N35,000 - N20,000 = N15,000 Step 4: Calculate the Contribution to Sales Ratio. The contribution to sales ratio (or P/V ratio) can be calculated as the change in profit divided by the change in sales, because fixed costs remain constant. Contribution to Sales Ratio = Change in ProfitChange in Sales Contribution to Sales Ratio = N15,000N60,000 Contribution to Sales Ratio = 0.25 Expressed as a percentage: Contribution to Sales Ratio = 0.25 × 100\% = 25\% The contribution to sales ratio is 0.25 or 25\%. That's 2 down. 3 left today — send the next one.