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Hi ,
Would you be able to assist me with the following question below :
Silver Co made sales of $193,200 during the year ended 31 August X1. Inventory decreased by $13,200 over
the year and all sales were made at a mark up of 42%.What was the cost of purchases during the year, to the nearest $1,000?
I have worked out the cogs is 193200/1.42 = 136000 (to the nearest $1000)
Then I know that inventory decreases by 13200 , but after this I am slightly confusedI hope to hear from you soon & thank you in advance 🙂
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Closing inventory reduces cost of sales, the difference between cost of purchase and cost of good sold can be explained from inventory movements. If there is a decrease in the movement of inventory, the cost of goods sold would be higher than the cost of purchases by the value of the decrease. a solution to your question would look like this. COGS. £136000 inventory reduced by £13200 therefore ur cost of purchase would be £122800
Vicks:
Según is correct. The cost of what was sold was 136,000, but 13,200 came out of inventory and so only the remainder of 122,800 needs to be purchased.
Segun:
Thank you for answering. However this is the Ask the Tutor Forum, and you are not the tutor 🙂
Please restrict yourself to answering in the general F3 Forum.
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