1. Bread Zeppelin

2. Bread Zeppelin – Question 1

3. Bread Zeppelin Gross Profit Margin Acid Test Ratio
As cost of sales is 60% of sales revenue, gross profit margin must be 40%
Cost of sales = £280,000 X 0.6 = £168,000
Gross profit = £280,000 - £168,000 = £112,000
Gross profit margin = (£112,000 / £280,000) x 100 = 40%
Inventory = (£180,000 / 5) x 3 = £108,000
Acid Test Ratio = (£180,000 - £108,000) / £80,000 = 0.9:1

4. Bread Zeppelin Return on Capital Employed Gearing
Operating profit = £28,000
ROCE = £28,000 / (£90,000 + £50,000) x 100
ROCE = £28,000 / £140,000 x 100 = 20%
Gearing = £50,000 / (£90,000 + £50,000) x 100
Gearing = £50,000 / £140,000 x 100 = 35.71

5. Bread Zeppelin – Question 2

6. Bread Zeppelin – Question 2
New Gearing (based on the proposed expansion)
Gearing = £150,000 / (£90,000 + £150,000) x 100
Gearing = £150,000 / £240,000 x 100 = 62.5%