Question

1. In June 2015, N. Ramachandran of Mumbai founded Natural Ice Cream Company, which was based on the idea of using fresh fruits such as Mango to create new and innovative naturally flavored ice creams. He began producing small quantities of unique but natural flavors of ice creams out of his flat in Wadala, Mumbai. Revenues were Rs. 15,00,000 in 2015 and were estimated at Rs. 36,00,000 in 2016. Because Natural Ice Cream company was selling ice creams containing “real” fruits and other premium ingredients, they could price each cup of ice cream at Rs. 50. The cost of producing the ice cream averaged Rs. 25 per cup. Other expenses plus taxes averaged an additional Rs. 10 per cup of ice cream in 2015 and were estimated at Rs. 12 per cup in 2016. Given this information answer the following questions:

1. Determine the number of cups of ice cream sold in each year.
2. Estimate the gross profit margin in each year.   
3. Estimate the net profit margin in each year.   

Answer 1

a:

Revenue in 2015 =1500000

price per cup=50

no of icecream sold in 2015= 1500000/50 =30000 cups

Expected evenue in 2016 =3600000

price per cup=50

no of icecream sold in 2016= 3600000/50 =72000 cups

b:

Gross profit margin = (revenue- cogs)/revenue

gross profit margin 2015= (1500000 -25*30000)/1500000 =50%

Gross profit margin 2016= 50% ( no addtional expense occured)

c:

Net profit margin= revenue-cogs-other expense)/revenue

Net profit margin 2015= (1500000-25*30000-10*30000)/1500000 =30%

Net profit margin 2015= (3600000-25*72000-12*72000)/3600000 =26%