An electrical store and cake shop both have the same mark up on cost. However the gross profit margin of the electrical store is significantly higher than that of the cake shop.
Which of the following is a possible reason for this?
A The cake shop has a higher turnover of inventory than the electrical store
B The electrical store takes advantage of trade discounts for bulking
C The cake shop has a higher level of wastage of inventory than the electrical store
D The cake shops revenue is increasing, while that of the electrical store is decreasing
Please i need help
in this question does the same mark up mean same number or same percentage of costs?
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interpretation
if the same mark up means same value then we can get as a result that cost of goods sold of cake shop is higher than that of electrical store
And B and C give us same result
But in question it is noticed significantly higher
that is way we should choose C
but i am not sure
10y ago#2Mark-up is the profit as a % of costs.
Gross profit margin is the profit as a % of selling price.
You really should watch our free lecture on mark-ups and margins.
Our lectures are a complete course for Paper F3 and cover everything you need to be able to pass the exam well.
i will watch
can you clarify this question please?
10y ago#4Sorry - I thought I had answered.
If they have the same mark-up it means they have the same profit as a % of cost (not the same number but the same %)
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