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CS Executive · Corporate Accounting and Financial Management · Financial Statement Analysis

Aarav Traders had revenue from operations of Rs 8,00,000 and cost of materials consumed of Rs 4,40,000 in the current year. In a common size income statement, the cost of materials consumed will be shown as:

The cost of materials consumed is 55% of revenue, since Rs 4,40,000 divided by Rs 8,00,000 and multiplied by 100 gives 55%. Each item in a common size statement is its amount divided by the revenue base.

  1. A45%
  2. B55%Correct
  3. C44%
  4. D64%

Explanation

4,40,000 / 8,00,000 x 100 = 55%. Check: 55% of 8,00,000 = 4,40,000. The 45% option is the complement, which is the percentage left after the cost (the margin), not the cost itself.

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