Greetings sir.
Hope you are in good health.
In 26.23, it mentions Sun co. sold goods to its parent company at a price of $40,000. The markup on the sales price was 40%. So I used 40/140 X sales price, to get the profit, to calculate PURP.
But the answer at the back used the margin style x40% , and thus due to this difference I got the answer wrong, although my method was correct.
Here’s what I did:
120,000 + (0.8 x (35,000 - PURP))
PURP = (40/140 x 40,000) x 0.25
Please , who is in error and what is the explanation and solution ?
Thankyou
Ask the Tutor ACCA FA
FA BPP Revision kit, Consolidated Financial Statements , 26.23 , pg 130
5y ago#1The goods were sold for $40,000
The question specifically says that the profit is 40% on the sales price. Therefore the profit is 40% x $40,000.
Sir , when the word markup is used, does that not indicate - addition to cost. Meaning whatever the cost was , the markup of 40% led to the sales price. The word markup is used.
Cost = x (100%)
Mark up = 40%
Sale = 40,000 (140%)
To find the difference/profit would mean to use 40/140 x 40,000
If the question had not used the phrase markup/cost up, then we would have done 40/100.
5y ago#3If nothing else is written then mark-up is the profit as a % of cost.
However this question specifically says that it is a % of selling price.
Thankyou, sir. For people with english as a second language, these types of sentence twists prove to be a ride costing marks. I wonder if those having english as a first language ever trip down as much in ACCA language.
5y ago#5You would be surprised - very many of those having English as a first language still have the same problem.
The more questions you practice and get wrong, the more you will used to what to look out for in the wordings :-)
Sign in to reply to this topic.