Question

10. Leonard is a retailer who deals in content. He started business on 1st January, 2011. The following information was extracted from his books.
Rent ₦25,000
Sales ₦850,000
Returns outwards ₦15,000
Purchases ₦400,000
Return inwards ₦25,000
Insurance ₦45,000
Fixtures and fittings ₦15,000
Wages and salaries ₦112,000
Transport ₦6,000
From the above information calculate the:
(a) Turnover; (b) Cost of goods sold (c) Gross profit (d) Net profit (e) Rate of stockturn

Accepted Answer

(a) Turnover = Sales − Returns inwards = ₦850,000 − ₦25,000 = ₦825,000.

(b) Cost of goods sold = Purchases − Returns outwards = ₦400,000 − ₦15,000 = ₦385,000 (based on the figures available in the source data, with no opening/closing stock given).

(c) Gross profit = Turnover − Cost of goods sold = ₦825,000 − ₦385,000 = ₦440,000.

(d) Net profit = Gross profit − Expenses = ₦440,000 − (Rent 25,000+Insurance 45,000+Wages&salaries 112,000+Transport 6,000) = ₦440,000 − ₦188,000 = ₦252,000.

(e) Rate of stockturn = Cost of goods sold ÷ Average stock. No opening/closing stock figures were provided in the source data for this question, so average stock (and hence the rate of stockturn) cannot be reliably computed from the given information.

WAEC Commerce 2013 Theory — Question 10

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