Suppose an entrepreneur has a capital of Php80, 000 for his small and medium enterprises (SMEs) of seaweed products like ice cream, muffins, puto, pizza, and siopao

Accounting Nov 05, 2020

Suppose an entrepreneur has a capital of Php80, 000 for his small and medium enterprises (SMEs) of seaweed products like ice cream, muffins, puto, pizza, and siopao. For one year of operation, the gross sales is Php300,000. The production cost which includes the cost of goods, electricity, fixed cost, labor cost, and many others is Php150,000. a. How much is the net profit in one year? b. What is the return of investment in one year?

Expert Solution

Total investment = Php 80,000

Gross sales = Php 300,000

Production cost = Php 150,000

(a) Net profit = Gross sales – Production cost

= Php 300,000 - Php 150,000

= Php 150,000

(b)

Return of investment Net Profit X 100 Total Investment

= 150,000 X 100 80,000 X

= 187.5%

Thus net profit in one year = Php 150,000

The return of investment = 187.5%

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