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Hi
Could you please help me to understand how to answer this questions. I could not understand why C is the correct answer?Silver Co made sales of $ 193,200 during the year ended 31 August X1. Inventory decreased by $ 13,200 over the year and all sales were made at a mark up of 42%.
What is the cost of purchases during the year, to the nearest $ 1000?A 149000
B 136000
C 123000
D 109000Thank you
Gabbi
This is what i think!
If sales are made @ a mark up of 42% then profit made on 193200 sles is 42/142 * 193200 and thats 57144 profit. That means cogs is about 136000 (you can test this and see that 57144 is 42% of 136000)
if you say that opening inventry is 100,000, then closing inventry is 86800 coz its decreased by 13200 and you know that cost of sales is 136000
so opening inventry + purchases – closing inventry is cogs = 136000
so purchases is about 123000
thats how i worked it out
just looking at what ive written i think ive seen a short cut – when i got to 136000 cogs why dint i just take of the change in inventry?
maybe ill ask johnmoffat when ask the tutor opens again – does anyone know when thats gonna be?
I’m always confuse profit margin :
profit margin is profit/sales or sales/profit ?
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