Unit 5 Incomplete records

coleycampbell

Hope someone can help.
I am getting confused about incomplete records.

How do you calculate the closing stock if it is missing. I know that the margin is 40%, I have the opening stock, sales and purchases, but how do I calculate the closing stock? I think I have done it one minute and don't understand it the next!!! :blushing:

peugeot

You have been given the gross profit margin which the company is required to achieve (40%). Consider this numerical example:

Sales...................................175,000
Opening stock........30,000
Purchases............100,000
Closing stock............?

We know that we have to make a gross margin of 40% i.e. 40% of the selling price. So (175,000 x 40%) = £70,000. So our closing stock figure is:

Sales..................................175,000
Opening stock............30,000
Purchases................100,000
Closing stock............(25,000)
Total cost of sales...............(105,000)
Gross Profit...........................70,000

You can check the gross margin by saying (70,000 / 175,000) x 100% = 40%.

Kind regards
Steve

coleycampbell

Steve,

Thank you very much for your help, it reads very clear and understandable, hopefully I will crack the exam now!!!

Thanks again