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gross profit

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › gross profit

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • August 23, 2014 at 7:51 pm #192076
    mansoor
    Participant
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    which of the following wd cause the gp margin to fall

    1. closing inventory is lower than opening inventory
    2. some items in the inventory were valued at less than cost.

    the text says that 2 is the correct answer.

    i chose 1 because:

    random numbers:

    cogs=50 +100 – 60 = 90
    cogs=60 + 100 – 50 = 110

    thus when closing inv<opening inv gives a higher cost thus a lower gp.

    so where am i wrong?

    August 24, 2014 at 6:57 am #192098
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    But it does not affect the margin (profit as % of sales).

    If GP margin is (say) 20%, then if sales are 100, cost of goods sold will be 80. If sales are 200, then cost of goods sold will be 160.

    The margin does not change just because sales and cost of goods sold increase or decrease.

    August 24, 2014 at 11:47 am #192147
    mansoor
    Participant
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    aha! … 🙂

    August 24, 2014 at 2:09 pm #192160
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    🙂

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