# ECONOMICS

## COST ACCOUNTING

### INVENTORY AND PRODUCTION MANAGEMENT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What is the formula for calculating the HPP Ratio?
 A (COGS + Sales) x 100% B (COGS-Sales) x 100% C (COGS:Sales) x 100% D HPP x 100%
Explanation:

Detailed explanation-1: -COGS / net sales x 100 = cost of goods ratio A lower COGS ratio means that the costs incurred in production are lower in comparison to the generated sales. In general, a COGS ratio of higher than 65% suggests that you should try to lower your production costs to allow the business to grow.

Detailed explanation-2: -Calculate the percentage of sales to expenses Determine your expenses and total sales for the period. Divide your expenses by your total sales. Multiply your result by 100.

Detailed explanation-3: -COGS percentages are determined by taking the COGS and dividing it by the revenue. For example, if the COGS for beer that week was \$1, 000 and \$4, 000 of beer was sold that week, the COGS percentage for beer would be 25%.

Detailed explanation-4: -A company’s gross profit margin percentage is calculated by first subtracting the cost of goods sold (COGS) from the net sales (gross revenues minus returns, allowances, and discounts). This figure is then divided by net sales, to calculate the gross profit margin in percentage terms.

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