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Sir, can I post MCQ test queries here?
I also got wrong for Q.1 Chapter 7, very confused about the % of cost-plus, mark up, and gross profit margin, can provide some hits to easily identify the equation?
And for the absorption costing, fixed overhead costs should be allocated to a product whether or not it was sold in the period, but why the overhead cost of $5 is excluded here?
You can post them here, but you also posted the same question under the test and I have answered it there 🙂
The overhead cost has not been excluded. The total cost is 10 + 8 + 3 + 5 = $26.
The gross profit margin is the profit as a % of the selling price. So for every $100 selling price, the profit is $20 and therefore the cost is $80. Putting it the other way round, for every $80 cost, the selling price is $100. Therefore for a cost of $26, the selling price must be 100/80 x $26.
(Mark-up is the profit as a % of the cost. You can find more examples of both the gross margin and the mark-up in the Paper FA lectures on “mark-ups and margins”)
Thank you, sir.
Sorry, I overlook for $5 fixed overhead costs.
I think I do need to practice more to check different scenarios on % of either cost plus, mark up or profit margin.
And I am quite afraid of arithmetic calculation for different topics, lots of lots calculation but quite understood on the rationale behind in essay part. 🙁
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