Inventory cost of sales

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Hi Mike,

I’m confused with the calculation of closing inventory in this question: Highwood co ACCA June 2011 question 2

The inventory of Highwood was not counted until 4 April 2011 due to operational reasons. At this date it’s value at cost was $36m and this figure has been used in the trial balance. Between the year end of 31 march 2011 and 4 April 2011, Highwood received a delivery of goods at a cost of $2.7m and made sales of $7.8m at a mark up on cost of 30%. Neither the goods delivered nor the sales made in this period were included in highwood’s purchases or revenue in the above trial balance.

The increase in closing inventory as given in the answer:
Delivered goods $(2.7m)
Cost of goods sold $6m
Increase in closing inventory $3.3m

My doubt:
“Received a delivery of goods at $2.7m…” doesn’t this mean that inventory would have increased?

And “made sales of $7.8m….” means that $6m worth of inventory would have left the closing balance?

Therefore my answer was:
Goods received $2.7m
Goods delivered ($6m)
Decrease in closing inventory 3.3m

I have another doubt too:
The selling price was $2.4m and they were sold at a gross profit margin of 25%. What should the cost of inventory be?

The exam answer:
$2.4m x 0.75 = $1.8m

Shouldnt it be:
$2.4m x 1.0/1.25 = 1.92m?

This was taken from Kaplan revision kit question 190 on Keystone Co.

Hope you could advise me on these, thanks 🙂