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Markup and margins

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › Markup and margins

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  • December 4, 2014 at 3:51 pm #217423
    Koey
    Member
    • Topics: 24
    • Replies: 26
    • ☆☆

    The draft account of Anthea Co. for the year end 31 December 20X9 include the following:

    Revenue $80000
    Gross Profit $20000

    It was subsequently discovered that revenue has been understated by $10000 and closing inventory overstated by $5000. After correction of these errors the gross profit percentage will be

    ans is 27.8%

    Please explain how to come up the answer.

    Thanks!!

    December 4, 2014 at 5:02 pm #217514
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54720
    • ☆☆☆☆☆

    Revenue increases by 10,000 to 90,000.

    Gross profit will also increase by 10,000 (because of extra revenue) and will also decrease by 5,000 (because of closing inventory). So profit will be 20,000 + 10,000 – 5,000 = 25,000.

    So gross profit percentage = 25000/90000 = 27.8%

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