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Hello Sir ,
I’m having issues with the workings on cost plus
2 different questions (part from 2 consolidated question) from the BPP revision kit:
a) during the year ended 31 Oct. 20×5 Black sold goods which originally cost $12 mil to Bury.Black invoiced Bury at cost plus 40%.
b) during the year Prestend sold goods with an invoice value of $240,000 to Northon. These goods were invoiced at cost plus 20%.
I was wondering why can’t i apply the same formula for both the questions when i refer to the back page for solution. Mind helping me find the right solution :(. Please and ty
in (a) you are told that the cost is $12M, so there is profit of 40% x $12M = $4.8M and the sale price is $16.8M
In (b) you are told that the sale price was $240,000, so this already includes the profit.
The cost was therefore 100/120 x $240,000 = $200,000 and the profit is 20% x $200,000 = $40,000.(The free lectures on mark-ups and margins, and on consolidations will help you.)
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