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Hi Mike. I couldn’t understand mini example 2.
His rival down the road achieves a gross margin of 15%. His closing inventory was 30% higher than the opening inventory. Sales in the
year were $450,000 and purchases were $400,000.
What was the opening inventoryI only got my figures for COS and G.Profit right. Can you please help me? I know this question isn’t that hard but i can’t do it. =(
Hi Mike. I got the answer right but my workings are different. Can you please tell me if this working is acceptable. Thanks alot.
P transferred raw materials at their cost of $4 million to S in June 2013. S processed all of these materials incurring additional direct
costs of $1·4 million and sold them back to P in August 2013 for $9 million. At 30 September 2013 P had $1·5 million of these goods
still in inventory. There were no other intra-group sales.What i did was,
9m – 5.4m= 3.6 profit.
So, 3.6\9 * 1.5m= 0.6m
Try this:
Let the value of opening inventory be “x”
Now, take it from there and, if you still can’t manage it, post again
For your second question, I think that I would have said that, of the $9 million transferred, there is still $1.5 million in inventory and that’s 1/6th of the transaction. The profit on transfer was $3.6 million and 1/6th of $3.6 million is $600,000
Setting that out as a linear expression, I get
1/6 x $3.6m = $.6m
and I believe that you’ll easily see that that is exactly the same as your
3.6\9 * 1.5m= 0.6m
Incidentally, you ask is your working acceptable. Any working is acceptable so long as you reach the correct solution. The ONLY proviso about that comment is that your workings in an exam should be clearly set out and clearly understandable but if you’ve reached the correct solution, no one is going to look at how you’ve arrived there
OK?
Hi Mike. I just tried to solve mini example but still couldn’t get the answer.
His rival down the road achieves a gross margin of 15%. His closing inventory was 30% higher than the opening inventory. Sales in the
year were $450,000 and purchases were $400,000.
What was the opening inventory?And yes i got it mike. Thanks alot. =) I’m preparing for F7 and F9 to sit in june 2016, with the help of OT notes and your lectures. I haven’t started F9 yet but i’ve done F7 lectures and notes till chapter 11. There are still somethings that i miss or forget while doing the comprehensive example in chapter 10. Can you please advice me how can i be perfect and not forget anything.
And i wanted to let you know that your lectures are extremely well structured and i enjoy studying for F7. And plus you make your students laugh and keep the lecture interesting. I’m never bored. Thankyou for that.
And one last thing, (i know you don’t have time, sorry) can you please advice me how to start with F9 and can i prepare for both exams till june?Oops. I just realised that i’ve done till chapter 10 and not 11. And it was chapter 9 (the comprehensive example). Sorry.
Zohaib, the best person to ask about F9 is surely John on the F9 Ask the Tutor page!
As for forgetting matters – for example in the comprehensive example – it all comes with practice!
You’re never going to be 100% so accept that to start with. Now, with practice, over and over again, you can get way up into the 90s
With reference to mini exercise number 2, you now know that cost of sales is the aggregation of opening inventory + purchases – closing inventory
and you also know that opening inventory is “x”
and you know that cost of sales is 382,500
so cost of sales 382,500 must = “x + 400,000 – 1.3x”
Now re-arrange that!
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