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Hi,
I’m a bit confused with the calculation of provision for unrealised profit (PUP).
Say a profit margin of 25%, and closing intragroup inventories of 100.Sometimes the PUP will be calculated as 100*25% = 25
And on other occasions as 100*25/125 = 20
How do we figure out which calculation is appropriate in a given scenario?
Thank you in advance.
Kay
Hi,
The first scenario you note is where a gross margin is applied to the selling price, and the second is where a mark up has been applied to the costs.
If you are really struggling with mark-ups and margins then you will need to go back and look at the lectures covering these in the Management Accounting paper.
Thanks
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