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The question from BPP old version Kit starting like this:
Bits and Pieces (B&P) operates a retail store selling spares and accessories for the car market. The store has previously only opened for 6 days per week for the 50 working weeks in the year, but B&P is now considering also opening on Sundays.
My ques – 1) In this how did they get to know 50% of GP when including Sunday as well ?
2) While calculating the New annual spending with discount how did they get 0.4m in it ?1. The question says that the gross profit from Monday to Saturday is 70%. It also says that on Sundays it will be 20 percentage points lower. 70% – 20% = 50%
2. Bits and Pieces does not seem to be in the current edition of the Revision Kit. However I have the actual exam question (and the examiners answer) in front of me, and I cannot find the 4% that you are referring to.
I understood the 1st part of it but the second part is while one is calculating the purchasing cost we need to calculate the current spending and new annual spending.. can you please help me with the calculating the new annual spending?
The purchases are currently $18,000 a week and so over the year are $900,000.
If they open on Sundays then they will spend an extra $8,000 each Sunday and so a total of $400,000 over the year.
So the total purchases will be $1,300,000, but because it is over $1,000,000 they will get a discount of 5%. So the new expenditure will be 95% x 1,300,000 = $1,235,000.
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