Mark up question
OliverTheEighth
Registered Posts: 4 New contributor 🐸
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
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.5K For AAT students
 317 NEW! Qualifications 2022
 160 General Qualifications 2022 discussion
 11 AAT Level 2 Certificate in Accounting
 56 AAT Level 3 Diploma in Accounting
 87 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 92 Software
 273 Tax
 135 Bookkeeping
 7.2K General accounting discussion
 200 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 582 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership