Which question are you referring to? If it is Question 5, since the profit is 20% of the cost the selling price must be 100% + 20% = 120% of the cost. Therefore the target cost must be 600/120% = $500.
It took my brain a while to figure out that reverse mathematical operation! I was only convinced when I realized that 20% of 500 (the unknown cost price) is 100 and when added gives us that 600 sale price. Defeated by math… Posted for anyone else coming here to figure it out.
Hi John, I am still confused at q5. It is the only one I have gotten wrong. I can’t seem to understand how you have gotten $20.
The cost gap is the difference between the expected cost (520) and the target cost (100/120 x 600).
Wow!!!i got a 100% on this 1. thanks
š
Hi John,
For Q5 I did the following calculations:
Sales revenue $600 Ć 5000 = $3,000,000
Profit required 20/120 Ć $3,000,000 = $500,000
Total cost $3,000,000 – $500,000 = $2,500,000
Target cost p/unit $2,500,000 / 5000 = $500
Cost gap $520 – $500 = $20
I got the same answer, would my calculations be OK for the exam?
Thanks,
Tahsina
Yes. (and nobody looks at your workings anyway for the section A and B questions š )
Hi Tahsina,
You are right but a small suggestion to save your time:
Being a mark up 20%. It means:
Selling 120%
Cost 100%
Profit 20%
So simply do: 100/120 * 600= 500
Then 520-500= 20
Ciao! š
Thank you John I got 100%
Great š
Dear John, i still have some confuse about the Q2, why we can not 300*1.2=250?
So if I do this, does that mean that 250 is the rate of return that it expects to get?
250 is certainly not a rate of return (rates of returns are %’ages!).
They require a return on investment of 20% and therefore they want a profit of 20% x $1,250,000.
What you are doing would be correct if they wanted a profit on cost (i.e. a profit margin) of 20%.
It would seem you did not watch my free lectures before attempting the test because this example is similar to example 2 in my lecture.
Thanks John. I sincerely appreciate.
Thank you for your comment š
Thanks John, your explanation was explicit as I scored 100% on the MCQ test.
I got full in this quiz, thanks to John’s very thorough interpretations. š
Well done š
Its all good for me on this chapter
thank you Mr. I get 100%… it was really very clear and digestible lecture
I was very confused about the 100. Still a little unsure
Which question are you referring to?
If it is Question 5, since the profit is 20% of the cost the selling price must be 100% + 20% = 120% of the cost.
Therefore the target cost must be 600/120% = $500.
thank you so much lecture for the test
You are welcome.
It took my brain a while to figure out that reverse mathematical operation! I was only convinced when I realized that 20% of 500 (the unknown cost price) is 100 and when added gives us that 600 sale price. Defeated by math…
Posted for anyone else coming here to figure it out.
For sure. I think the vocabulary is just as important!
Thanks for the lecture and the questions
Oh yeah! ?%
This was perfect am probably progressing i got 100%.despite being average in chapt.1 Thank you Open tuition.
Hi, Iām confused by question 5..
Is it possible you can do a breakdown?
The selling price is $600.
For the profit to be 20% of the cost, the cost needs to be 100/120 x $600 = $500, and this is therefore the target cost.
The estimated cost is actually $520, and therefore the cost gap is 520 – 500 = $20.
I hope am making a progress
Thank youu for the quiz . I got 8% . My mistake at Q5 , i think the markup is markup cost ??
The mark-up is the profit as a % of the cost.