You are required to find the advertising cost per cent on sales for each product and the…

You are required to find the advertising cost per cent on sales for each product and the territory showing how you will present the statement to management.

The selling and the administration cost for the year were as follows:

Products 1 and 2 were sold at 40% above manufactured cost, while product-3 was sold at 50% above its manufactured cost. Domestic Ltd. has devoted a great deal of time and effort in developing sales of product-3. The management is now questioning the wisdom of this policy and has authorised a study of selling and administrative cost by product lines.

An analysis reveals the following:

All products for the year was sold, with no inventory costs carried forward from the beginning of the year and no returns of sales by customers.


(i) Prepare a profit statement with all costs broken down according to product line.

(ii) Indicate which product line shows the higher rate of profit to sales and which the least.

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