Unit 5 Skills Test

jadeyp

Hello, I am new to this so hope I have posted in the right place!!

In the unit 5 skills test that I did yesterday, you had to calculate the closing stock as the files had been destroyed. It said that goods were sold at 40%. We were given the figures for sales, opening stock and purchases. How would I go about calculating the closing stock...? I have heard their are two methods of doing this can anyone let me know what they are as I was totally confused!! Would really appreciate anyones help....x

roy ramphul

Cost of sales is 40% Markup
convert Markup to Margin
which is 2/7
margin = gross profit / sales
2/7 =gross profit / sales
to work out the gross profit
will be sales * 2/7
Then work out cost of sales
= Sales less gross profit
Then work out closing stock

opening stock + purchases less closing Closing Stock = Cost Of Sales
Closing Stock = Opening Stock + Purchases Less Cost Of Sales

visha

Roy Ramphul is right though you have to pay a lot of attention on his explanation.

The first thing that you need to establish is:- 40% is it Mark-up? or is it Margin?

If It was mark up then

sales Say.................................................£126,000 (known)= 140%
Less Cost of goods Sold

Opening stock say ..............25,000 (known)
Purchases say...................100,000 (known)
Total goods available to sell.125,000
Less c/stock .......... (?????).........................90,000 = 100% (126/140 x 100) (closing stock = 125,000 - 90,000 = 35,000)

Gross Profit..............................................36,000...=40%.(126/140 x 40) mark-up 40% of Cost

If It was Margin then
sales Say.................................................£126,000 (known)= 100%
Less Cost of goods Sold

Opening stock say ..............25,000 (known)
Purchases say...................100,000 (known)
Total goods available to sell.125,000
Less c/stock .......... (?????).........................75,600 = 60% (126/100 x 60) (closing stock = 125,000 - 75,600 = 49,400)

Gross Profit..............................................50,400...=40%.(126/100 x 40) Margin 40% of Selling price