Bloodworth is engaged in the sale of spare parts for tractors and farm machinery.It has a close rival, Ketley Limited.Extracts from the statements of profit or loss of the two companies for the year ended 31 December 20X1 are as follows: Ketley's gross profit margin is higher than Bloodworth's.However, Ketley charges depreciation of £18 000 on its storage facilities to operating expenses whereas Bloodworth includes the equivalent charge in its cost of sales.After making the appropriate adjustment for this difference, which of the following statements are correct?
A. Operating profit margin remains unchanged.
B. Bloodworth's gross profit margin now exceeds that of Ketley.

Question

Bloodworth is engaged in the sale of spare parts for tractors and farm machinery.It has a close rival, Ketley Limited.Extracts from the statements of profit or loss of the two companies for the year ended 31 December 20X1 are as follows:  Ketley's gross profit margin is higher than Bloodworth's.However, Ketley charges depreciation of £18 000 on its storage facilities to operating expenses whereas Bloodworth includes the equivalent charge in its cost of sales.After making the appropriate adjustment for this difference, which of the following statements are correct?
A. Operating profit margin remains unchanged.
B. Bloodworth's gross profit margin now exceeds that of Ketley.

Quizplus · Accepted Answer

The Answer of Bloodworth is engaged in the sale of spare parts for tractors and farm machinery.It has a close rival, Ketley Limited.Extracts from the statements of profit or loss of the two companies for the year ended 31 December 20X1 are as follows:  Ketley's gross profit margin is higher than Bloodworth's.However, Ketley charges depreciation of £18 000 on its storage facilities to operating expenses whereas Bloodworth includes the equivalent charge in its cost of sales.After making the appropriate adjustment for this difference, which of the following statements are correct?
A. Operating profit margin remains unchanged.
B. Bloodworth's gross profit margin now exceeds that of Ketley.

Bloodworth Is Engaged in the Sale of Spare Parts for Tractors