wWhich of the tollowing would reduce net proft but hae noeffect on gross profica

Question

wWhich of the tollowing would reduce net proft but hae noeffect on gross profica negotiating a lower purchase price for raw materials a reduction in spend on training of distribution staff reducing the commission rate paid to salesmen an increase in IT support costs for the accounting package used If current assets are E30,000, and the current ratio is 1.5, then the value of current liabilities is £10,000 £30,000 £20,000 How would an increase in administration costs affect reported profits? Decrease Operating Profit, but has no effect on Gross Profit. No impact on Operating Profit but will decrease Gross Profit. No impact on Operating Profit, but will increase Gross Profit. Increase Operating Profit, but decreases Gross Profit.

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

Lowering the raw material prices will result in increase in gross profit and also a corresponding increase in net profit as the costs have reduced. So, option A is not correct

Lowering spend on distribution staff will result in increase in net profit as the costs have reduced. So, option B is not correct

Lowering the commission rate of salesmen will result in increase in net profit as the costs have reduced. So, option C is also not correct

An increase in IT support costs for accounting package will not result in any fall in gross profit but will result in a fall in net profit. So, option D is the correct option

So, as per above discussion, option D is the correct option

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