Mark up question
OliverTheEighth
Just JoinedRegistered Posts: 4
Wondering if anyone can help with this question, which is on FRA Dec 08 exam:
According to SSAP9, stocks should be stated at the lower of cost and net realisable value.
On 30 Sep 08, closing stock was recorded at its selling price of £19,800 excluding VAT.
The mark up on the cost of these goods is 65%.
Calculate the cost of the closing stock.
Model answer: £19,800/1.65= £12,000
As I understand it, the mark up is calculated from the cost of sales
ie. £12,000 + 65% = £19,800
However, this question is asking you to calculate the cost of sales by giving you the
selling price  £19,800. I was wondering about the formula they used (£19,800/1.65)  have not seen this given in the Osborne book  does this formula hold true to every
such question  simply add 1 to the % figure, then divide into the selling figure?
Thanks.
According to SSAP9, stocks should be stated at the lower of cost and net realisable value.
On 30 Sep 08, closing stock was recorded at its selling price of £19,800 excluding VAT.
The mark up on the cost of these goods is 65%.
Calculate the cost of the closing stock.
Model answer: £19,800/1.65= £12,000
As I understand it, the mark up is calculated from the cost of sales
ie. £12,000 + 65% = £19,800
However, this question is asking you to calculate the cost of sales by giving you the
selling price  £19,800. I was wondering about the formula they used (£19,800/1.65)  have not seen this given in the Osborne book  does this formula hold true to every
such question  simply add 1 to the % figure, then divide into the selling figure?
Thanks.
0
Comments

Yes it is.
The cost is 100%
The mark up is 65%
So the total figure is 165%
When you work with percentages to calculate 65% you divide the figure by 100 times 65. This is the same as just saying times 0.65.
To calculate 165% that works too. You divide the base figure by 100 times 165, which is the same again of 1.65.
Hope that helps!
Rinske0 
Many thanks, Rinske
Yes, £19,800/165 (to give 1%) x 100
Cost of goods = 100%
Much clearer0