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Operating Profit Margin

4 (a) Refer to Appendix 1. Calculate the impact of a 15% increase in the price of raw materials for Factory S on its operating profit margin in 2019, assuming revenue and all other cost data remains the same. (5 marks)
Summer 2019 Paper 33

Operating profit margin = Operating profit / sales revenue × 100

Sales revenue ($ m) __________________________________________________9.3

Raw materials cost ($ m) ____________15% of 2.79 = 0.4185 = 2.79 + 0.42 = 3.21

Labour cost ($ m)____________________________________________________ 1.55
Transport cost ($ m)__________________________________________________ 0.62
Factory fixed costs ($ m)______________________________________________ 2.00
Allocated fixed costs__________________________________________________0.50

Total cost____________________________________________________________7.88

Operating profit 9.3 – 7.88 = 1.42

OPM 1.42 / 9.3 × 100 = 15.27%

Current OPM 19.78%

Change in OPM 4.51%