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Mark up and Margins

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Mark up and Margins

  • This topic has 7 replies, 3 voices, and was last updated 10 years ago by John Moffat.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • August 27, 2014 at 5:39 pm #192554
    Michael
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Please Mr John(The Tutor),

    I have tried working out this question but i kept getting a wrong answer due one silly mistake i dont know …Please help!

    The Question
    On Sept 1 2006,A business had an inventory of $380,000,During the month, sales totalled $650,000 and purchases of $480,000. On 30th Sept 2006,fire destroyed some of the inventory.The undamaged goods of inventory were valued at $220,000.The business operates with a standard gross profit Margin of 30%.
    What is the cost of the inventory destroyed in the fire outbreak.

    The answer i got is $140,000 which is wrong.
    Thank you

    August 27, 2014 at 7:00 pm #192566
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54718
    • ☆☆☆☆☆

    Sales totalled 650,000, and therefore the cost of sales should be 70% x 650,000 = $455,000.

    The opening inventory was 380,000, and the purchases were 480,000. Therefore they had available for sale a total of 860,000.

    Since the cost of goods sold was 455,000, the closing inventory should have been 860,000 – 455,000 = 405,000.
    However the actual closing inventory was only 220,000 and so the inventory destroyed must have been the remainder of 185,000 (405,000 – 220,000).

    August 29, 2014 at 3:22 pm #192966
    Michael
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Thank you so much Mr Moffat!

    August 29, 2014 at 5:57 pm #192982
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54718
    • ☆☆☆☆☆

    You are very welcome, Michael 🙂

    September 11, 2014 at 6:15 am #194628
    Carol
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    Please help me with Chapter 18 Test question 3
    The draft accounts of Anthea Co. For the year ended 31 December 20×9 include the following:

    Revenue $80,000
    Gross profit $20,000

    It was subsequently discovered that the revenue had been understated by $10,000 and closing inventory overstated by $5,000. After correction of these errors the gross profit percentage would be……

    (I know that the revenue would be $90,000)

    Thanks

    September 11, 2014 at 8:30 am #194637
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54718
    • ☆☆☆☆☆

    The higher revenue will also mean higher gross profit (by 10,000).
    The overstating of the closing inventory will mean that the profit is too high by 5,000.

    So….the revenue will be 90,000, and the gross profit will be 20,000 + 10,000 – 5,000 = 25,000.

    Hope that helps 🙂

    September 11, 2014 at 7:36 pm #194687
    Carol
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    Thanks a lot Mr. Moffat!

    September 11, 2014 at 8:51 pm #194691
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54718
    • ☆☆☆☆☆

    You are welcome 🙂

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