10.8 Dilip has run a successful umbrella manufacturing business for several years. His gross profit margin has remained constant at around 34%, and his net profit margin is usually between 14% and 15%. However, Dilip is concerned because he thinks that his business has underperformed in the current year. He presents you with the following list of balances for the year ending 30 September 20X8 and asks you to;

(a) prepare a manufacturing account and a profit and loss account; and

(b) calculate gross and net profit margins for the year. (Note that the profit and loss account is to show expenses under two main headings: selling and distribution; and administration.)

£

Depreciation of factory machinery 6 696 Sundry administration costs 3 289 Raw materials purchases 112787 Production supervisory salaries 24 690 Telephone charges - sales department 3 608 Administration office rental 13 374 Office insurance 2 401 Factory cleaning 8 792 Depreciation of office fixtures and fittings 1 895

£
Salespersons' salaries 28 660 Salespersons' commissions 2811 Sales 449 760 Sales returns 1 560 Depreciation of delivery van 2 180 Electricity charges - administration office 2 780 Factory insurance 4393 Depreciation of fittings in factory 2 200 Telephone charges - administration 1 603 Accountancy and tax advice 2 500 Sundry distribution and selling costs 906 Secretarial and administrative salaries 23 749 Depreciation of office computer 2 060 Wages of factory machine operators 99 270 Light and heat for factory 9 222 Factory rental 28 700 Sundry factory expenses 1 861 Factory canteen costs 2 189 Factory repairs and maintenance 3 730 Opening stock at 1 October 20X7 Raw materials 12 705 Work-ln-progress 3 879 Finished goods 37 222 Closing stock at 30 September 20X8 Raw materials 13 573 Work-in-progress 2 693 Finished goods 39470