margins!!

evil edna
evil edna Registered Posts: 5 New contributor 🐸
in AAT Level 3 (Level 6 in Scotland)
Just doing the december 07 test in prep for wednesday FRA. question 1.6 has got me - just can't get my head round margin & mark up, got a mental block there.

question is: 'closing stock valued at selling price at £22,750 excl vat. Mark up on goods is 40%, calculate closing stock figure?'

answer is: 22,750/1.4=£16,250

Can anyone elaborate for me please??

Comments

  • evil edna
    evil edna Registered Posts: 5 New contributor 🐸
    I mean december 05
  • Staffz
    Staffz Registered Posts: 40 Regular contributor ⭐
    Hi,

    It is a shortened version of:

    22750/140 (100%+40% mark up)=162.5 (1%)
    162.5*100= 16250 (100%)

    In this way you know it cost you £16250

    And to double check

    16250*40%=6500
    6500+16250=22750

    Hope that helps, as my explainations are pretty rubbish (they work in my head!):001_unsure:

    H.
  • ambitious
    ambitious Banned User Posts: 93 Regular contributor ⭐
    Everyones got a different way of working these things. I'll show you the method I use:

    Gross Profit Mark Up = Gross Profit/Cost of Sales x 100
    = (Sales - Cost of Sales)/Cost of Sales x 100

    so

    (22750-c)/c x 100 = 40 where c is cost of sales
    (22750-c)/c = 40/100 = 0.4
    22750-c = 0.4c
    22750 = c + 0.4c = 1.4c

    so c = 22750/1.4 = £16250 which is the closing stock figure at cost price.
  • kathleen bailey
    kathleen bailey Registered Posts: 3 New contributor 🐸
    I have just replied about this question at 2.31 to sanju, take a look, hope it helps
  • evil edna
    evil edna Registered Posts: 5 New contributor 🐸
    thanks for your help! think its sinking in..tomorrow will be the test!! good luck to eveyone doing FRA tomorrow!!!!!!!! :scared:

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