O Level Accounting (7707)•7707/11/M/J/23
Explanation
Overhead Control via Margin Difference Steps:
- Gross margin measures profitability before overheads; profit margin is after.
- Overhead burden = gross margin % minus profit margin %.
- Calculate differences: A (23%), B (20%), C (21%), D (18%).
- Lowest difference indicates most efficient overhead control.
Why D is correct:
- D's 18% difference means overheads consume the smallest portion of gross profit, per the formula: overhead % = gross margin - profit margin.
Why the others are wrong:
- A: 23% difference shows highest overhead burden.
- B: 20% difference exceeds D's, indicating less efficiency.
- C: 21% difference exceeds D's, indicating less efficiency.
Final answer: D
Topic: Interpretation of accounting ratios
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