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  • Management Accounting: Case ON Amerbran Company

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    Havish Srinivasula
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    This document discusses the effect of excise taxes on the gross margin of Amerbran Company. Amerbran sells various consumer products including tobacco, for which it collects and includes excise taxes in its revenue. However, including excise taxes in revenue overstates sales revenue and reduces gross margin. Specifically, sales revenue is overstated by 36% ($4,233,130) and gross margin is reduced from 39% ($4,004,130) to the reported 25%. The document also provides ratio analyses for two years that show small changes in metrics like return on assets, equity, and sales from the previous year.

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    Management Accounting

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    This document discusses the effect of excise taxes on the gross margin of Amerbran Company. Amerbran sells various consumer products including tobacco, for which it collects and includes excise taxes in its revenue. However, including excise taxes in revenue overstates sales revenue and reduces gross margin. Specifically, sales revenue is overstated by 36% ($4,233,130) and gross margin is reduced from 39% ($4,004,130) to the reported 25%. The document also provides ratio analyses for two years that show small changes in metrics like return on assets, equity, and sales from the previous year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
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    Download as pptx, pdf, or txt
    78 views6 pages

    Management Accounting: Case ON Amerbran Company

    Uploaded by

    Havish Srinivasula
    This document discusses the effect of excise taxes on the gross margin of Amerbran Company. Amerbran sells various consumer products including tobacco, for which it collects and includes excise taxes in its revenue. However, including excise taxes in revenue overstates sales revenue and reduces gross margin. Specifically, sales revenue is overstated by 36% ($4,233,130) and gross margin is reduced from 39% ($4,004,130) to the reported 25%. The document also provides ratio analyses for two years that show small changes in metrics like return on assets, equity, and sales from the previous year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 6

    MANAGEMENT ACCOUNTING

    CASE
    ON
    AMERBRAN COMPANY
    By
    P. Nagarjuna
    S.Havish
    ABOUT COMPANY

     SELLS VARIOUS COSUMER PRODUCTS


    • FOOD
    • TOBACCO
    • DISTILLED PRODUCTS
    • PERSONAL CARE PRODUCTS
    FINANCIAL SERVICES
    Effect of Excise taxes on gross margin in Amerbran company

     collects excise taxes on tobacco products including them in revenues .

     If included as revenue the sales revenue is over stated then and if taken as a
    product cost then it reduces the gross margin

     Sales revenue is shown higher by 36 % ($4,233,130).

     Gross margin=$4,004,130 and then gross margin percentage would be


    39% compared to what now is 25%.
    RATIO ANALYSIS
    20x1 20x0

    Return on assets 0.08=8% 0.07=7%

    Return on equity 0.14=14% 0.168=16.8%

    Gross margin % 0.2534=25.34% 0.2508=25.08%

    Return on sales 0.0431=4.31% 0.0576=5.76%

    Asset turnover 1.64 times 1.42 times

    Day’s cash 1.47 days 1.43 days


    20x1 20x0

    Day’s receivable 36.2 days 38.1 days

    Day’s inventories 162.1 days 173.8 days

    Inventory turnover 2.25 times 2.10 times

    Current ratio 1.30 1.53

    Acid test ratio 0.48 0.54

    Debt/Capitalization 27.51% 29.94%


    ratio

    Times interested 6.87% 7.42%


    earned
    Thank You

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