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John reduces his inventory level by $12,000 during the year and makes sales of $40,000. His markup on cost is 20%
What are his purchases during the year?The ans given is 12333.
The answer is not 12,333. Either you have mistyped one of the figures or there is a mistake in your book.
The cost of sales was 100/120 x $40,000 = $33,333.
$12,000 came from inventory and therefore they must have purchases 33,333 – 12,000 = $21,333.
Have you watched my free lectures on mark-ups and margins? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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