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Sir this question is from Kaplan
Bits and pieces (June 2009)
I could not understand where they arrive at current results 300 days and the new result of $3.8m under the incremental revenue with gross profit of 65.8%
Also the current annual purchasing of $18,000. I have no idea where this $18000 was originated from.
Thanks in advance
I do not have the Kaplan Kit (only the BPP Revision Kit), but I do have the original exam question and answer.
The first paragraph of the question says that the store previously opened for 6 days a week for 50 working weeks a year. So a total of 300 days. With revenue of $10,000 a day this is total revenue of $3,000,000.
In future they will open on Sundays also, which is an extra 50 days. The current revenue is $10000 per day, but on Sundays it will be 60% higher, so it will be $16,000 per day.
So extra revenue of 50 x $16,000 = $800,000, giving new total revenue of $3,800,000.
On non-Sunday sales they make 70% profit, so 70% x $3,000,000 = $2,100,000.
On Sunday sales they make 50% profit, so 50% x $800,000 = $400,000.
So total gross profit will be $2,500,000.
Therefore the overall profit will be 2,500,000/3,800,000 = 65.8%.
Currently they sell $10,000 per day. The profit is 70%, and therefore the purchases are 30% x $10,000 = $3,000 per day.
Currently they open 6 days a week, so purchases per week are 6 x $3,000 = $18,000 (and with 50 weeks a year a total of 50 x $18,000 = $900,000).