HARVEY simulation unit 5 - stuck on question

lauram

hi all
ok so im stuck on part 2 of this, il explain as best i can.

basically theres been a stock loss and we are being asked to find out what the stock loss is, without knowing the closing stock figure.

opening stock is 62995
purchases cash and credit 9075
sales cash and credit 16,396

the notes say that - a quick stock check was made after the theft and these are estimated at 45,000 cost.

their policy is to mark up 50% on the cost of furniture.

we are to calculate the cost of the missing stock.

now i wana add here that i do have the answer for this, but it makes no sense how they got it, so il post it below and maybe someone can make sense of it for me.

thanks

lauram

ok so heres the answer

Mark-up = 50%

Therefore, margin based on sales = 331/3%

Sales x 331/3% = Gross Profit £16,396 x 331/3% = £5,465

Cost of Sales = 662/3% £16,396 x 662/3% = £10,931

Opening Stock + Purchases - Closing Stock = Cost of.Sales

£62,995 + £9,075 - ? = £10,931

? = £61,139 Total closing stock

total £61,139
less salvaged £45,000
insurance claim £16,139

now what i dont get is how they got the 33 1/3 as the margin? im really looking at this blindly and just dont have a clue, really panicked in case this comes up in my real skills test next week, well 2weeks i think.

sdv

lauram wrote: »

ok so heres the answer

Mark-up = 50%

Therefore, margin based on sales = 331/3%

now what i dont get is how they got the 33 1/3 as the margin? im really looking at this blindly and just dont have a clue, really panicked in case this comes up in my real skills test next week, well 2weeks i think.

MARK UP is an expression of profit as a percentage added to the COST of purchase

MARGIN up is an expression of profit as a percentage of SELLING price

For example

TOM TOM was purchased at a COST of £100, to be sold at a 50 % mark-up (£50) giving a selling price of £150.

The gross MARGIN profit on the sale of TOM TOM is 33+1/3 % (50/150 x 100%)


Mark=up of 50% is same as 33+1/3% Margin.



Sales = £16 396 X 33+1/3 % =£5,465 (or a mark-up of 50%. Cost = £10,931)

cost of sales = 16 396 - 5 465 =£10 931

Cost of sales - (o/stock + purchases) = C/stock

£10 931 - (62 995 + 9 075)= £61 139 - This should have been the expected closing stock in the stores

However, closing stock salvged = £45,000 therefore

Insurance claim = £61,139 less £45,000 = £16,139


See this [thread=26931]link[/thread] to understand Markup / Margin

lauram

thank you for that, i understand it a lot better now.

thank heavens for this forum lol xx

snowmarauder

Hi ya, I just add it to the 100%, so original cost is the 100% mark up 50%. you can see the fraction a bit more clearer then, if you get my gist. So is it was 25% you would see its a 1/4 of original cost. If you show your workings you are showing concept of understanding, even if you dont use there formula. I found it works for margin for me also.