Kano Outfitters operates two selling divisions: Men's Wear and Women's Wear. For the financial year ended 31 December 2025, the following departmental financial information is available:
| Details | Men's Wear (₦) | Women's Wear (₦) |
|---|---|---|
| Opening stock | 30,000 | 25,000 |
| Purchases | 150,000 | 120,000 |
| Sales | 250,000 | 200,000 |
| Closing stock | 40,000 | 35,000 |
Total joint expenses incurred during the year were:
- Rent and rates: ₦36,000 (apportioned based on floor space occupied: Men's Wear = 600 sq. m; Women's Wear = 400 sq. m)
- Salaries and wages: ₦50,000 (apportioned based on staff count: Men's Wear = 12 employees; Women's Wear = 8 employees)
- Direct advertising expense for Men's Wear: ₦8,400
What is the net profit of the Men's Wear division?
- ₦50,000Answer
- B₦58,600
- CNet loss of ₦30,000
- D₦60,000
Answer
The net profit of the Men's Wear division is ₦50,000.
The correct net profit is calculated by first finding the gross profit of Men's Wear (₦250,000 - ₦140,000 = ₦110,000) and then deducting total apportioned and direct expenses (Rent: ₦21,600 + Salaries: ₦30,000 + Direct Advertising: ₦8,400 = ₦60,000), leaving a net profit of ₦50,000.
Step-by-Step Solution
Key Concept
Departmental Trading, Profit and Loss Account Preparation