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A sole trader fixes her prices by adding 50% to the cost of all goods purchased. On 31 october 2003 a fire destroyed a considerable part of the inventory and all inventory records. Trading account for the year included the following.
Sales. 281250, opening inventory 183600, purchases 249200, closing inventory 204600, gross profit 228200. What inventory loss occurred. The calculation was 281250×2/3=187500. Loss of inventory 228200-187500=40700. My question is I don’t seem to understand the 2/3 kindly explain sirFor every 100 cost, they add on 50 and the selling price is therefore 150.
So, for every 150 selling price the cost is 100.
So if the selling price is 281250, then the cost is 100/150 x 281250
(100/150 is the same as 2/3, but I would use 100/150 🙂 )The free lecture on mark-ups and margins will help you.
Thank Sir, this together with the lectures has made it a lot more easir to understand.
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