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Dear Mike,
Polestar transferred raw materials at their cost of 4M to Southstar in June 20×3. Southstar processed all materials incurring additional direct cost of 1.4 M and sold them back to Polestar in August 20×3 for 9M. At September 20×3 Polestar had 1.5M of these goods still in inventory. There were no other intragroup sales.
The solution used a 25% mark up. How did they come up with the 25%?
Thanks very much.
Kind regards,
KatalinThis is from the ACCA’s answers:
“The profit on the sale of the goods back to Polestar is $3·6 million (9,000 – (4,000 + 1,400)). Therefore the unrealised profit (URP) in the inventory of $1·5 million at 30 September 2013 is $600,000 (3,600 x 1,500/9,000)”
Where have you found “25% mark-up”?
OK?
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