Skip to content

ACCA Applied Knowledge · Management Accounting · Performance measurement - application

Kestrel Ltd reported revenue of $800,000, cost of sales of $520,000 and operating expenses of $140,000. What is its operating profit margin?

The operating profit margin is 17.5%. Operating profit is revenue of $800,000 less cost of sales $520,000 and operating expenses $140,000, giving $140,000, which divided by revenue is 17.5%. Gross margin would be 35%, but it ignores operating expenses.

  1. A17.5%Correct
  2. B35.0%
  3. C65.0%
  4. D40.0%

Explanation

Operating profit = 800,000 - 520,000 - 140,000 = 140,000. Margin = 140,000 / 800,000 = 17.5%. The 35% figure is the gross margin (280,000/800,000), which ignores operating expenses.

Did you get it right without looking?

One question tells you little. A timed set on Performance measurement - application shows your real accuracy, how long you take and where you lose marks.

Practise Performance measurement - applicationFree diagnostic mock

More Performance measurement - application questions