Pepe denim was confused, why their profit was declining despite soaring sales. And the company is stuck in the dilemma if they should do some changes mentioned in the case.

3. GROSS PROFIT 38.33%

5. GROSS PROFIT
36.35%
REDUCTION
25.66%

6. 0
100
200
300
400
500
600
700
2009-2010 2010-2011
616.6666667
473.1591667
COGS/UNIT

7. 35.00%
35.50%
36.00%
36.50%
37.00%
37.50%
38.00%
38.50%
2009-2010 2010-2011
38.33%
36.35%
GROSS PROFIT
18.00%
18.50%
19.00%
19.50%
20.00%
20.50%
2009-2010 2010-2011
18.67%
20.01%
PROFIT MARGIN

8. Rs 800
37.00%
37.50%
38.00%
38.50%
39.00%
39.50%
40.00%
40.50%
41.00%
2009-2010 2010-2011
38.33%
40.86%
GROSS PROFIT

9. Rs 900
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
2009-2010 2010-2011
38.33%
47.43%
GROSS PROFIT

11. COGS = Rs. 1304850000
inthousandsrupees

12. Only includes salaries of support staff.
Includes salaries of employees

13. Sum of Indirect Expenses =
Rs 280500000

14. Only depreciation of office equipment is considered
Bad debts expense was added back for tax calculation

15. 18.67%
20.61%
17.50%
18.00%
18.50%
19.00%
19.50%
20.00%
20.50%
21.00%
31-Mar-10 31-Mar-11
Profit Margin
32.00%
33.00%
34.00%
35.00%
36.00%
37.00%
38.00%
39.00%
2009-2010 2010-2011
38.33%
34.76%
GROSS PROFIT
WE SAY NO!