I am looking at operational efficiency as a ratio of indirect production costs to gross profit 1 (GP 1 does not include these indirect costs) (Ind Prod/GP). I have been asked to bridge the difference in the ratio between two periods. Let us assume that year 1 the Ind Prod was 50 and GP 100. Assuming constant sales and volume, in year two the Ind Prod was 40 and GP 120 .
Hence, my ratios are: Year 1: 50% Year 2: 33.3%.
How much of the 16.7% difference is attributed to Ind Prod and how much to GP?
Thank you in advance!