Exam question...help please!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
Hi everyone<BR><BR>I am working through a past exam paper for the intermediate level on Financial Records and I am stuck on 1 question and would appreciate some help please.<BR><BR>You basically have to 'calculate the closing stock figure' from the following information:<BR><BR>Sales £75000.<BR>The closing stock figure is £24000 at selling price.<BR>A note is in last year's file stating that the sales margin is normally 1/3.<BR><BR>I know that stock is valued at lower of cost and nrv but I dont know how to work this question out. What is the closing stock?<BR><BR>Thanks.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Exam question...help please!

    Sorry to start off with, but I hope not to confuse you!<BR><BR>When calculating the sales price there is two methods either using a 'margin' or a 'mark-up'.<BR><BR>Just been thinking about the differences and best way to explain. When you are told that the sales price is a margin then you simply need to think of the sales price as being 100% (the whole price) and take off the margin price/profit. So in this question the sales price is £24,000 and the margin is a third. If you divide the sales price by 3 and times by two you get the stock value as £16,000. £16,000 is two thirds of the sales price, which leaves you with a margin/profit amount of £8,000.<BR><BR>If in the same question it was a third mark-up instead, you would need to think of the sales price as being more than 100%, ie it would be 4/3rd's. You divide the sales price of £24,000 by 4/3, and times the result by 3 to give you the stock value which would be £18,000. This can be checked by adding a third of £18,000 (£6,000) to the £16,000 stock cost to give you the sales price of £24,000.<BR><BR>Im really sorry if I have confused you anymore, but didn't see just giving you the answer as being of any benefit when you come across another question the same!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Exam question...help please!

    Thanks for the help, craigy. I had an idea that was the answer but just needed someone else to confirm it. I am pleased you explained it to me, thanks.

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