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Hello. For the following question, can you please help me with 13.10? I am pasting the entire 2 questions here because they are based on a common scenario. How is the answer for qn 13.10 B?? Isn’t it supposed to be D?
The following scenario relates to questions 13.9 and 13.10.
In the year to 31 May 20X8, Lesley’s sales totalled $600,000 and her cost of sales totalled $480,000.
13.9 What are the correct figures for Lesley’s mark up and margin?
Mark up Margin
A 25% 25%
B 25% 20%
C 20% 25%
D 20% 20%13.10 What is the correct mark up figure if the gross profit margin is 60%?
A 60.0%
B 37.5%
C 66.7%
D 150.0%The relationship between cost of sales, profit and sales is always:
Cost of sales + Profit = Sales
The markup is always defined with relation to the profit and the costs: by what percentage are costs marked -up (ie, added to) to result in the sales.
So, Markup % = 100 x Profit/Cost of sales
The margin (or gross profit margin) is always defined with respect to the profit and the sales figure:
Margin = 100 x Profit/sales.
13.9
Cost of sales + Profit = Sales, so
480,000 120,000 = 600,000Markup = 100 x 120,000/600,000 = 25%
Margin = 100 x 120,000/600,000 = 20%13.10
Cost of sales + Profit = Sales. If the GP Margin is 60%, then the pattern must be:
40 + 60 = 100 so that 60/100 = 60%
The markup, being defined with respect to costs, is therefore 100 x 60/40 = 150%
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