Home For AAT student members AQ 2013 AAT Level 3 (Level 6 in Scotland)

Margin and Markups? Confused.

On the FSTP sample assessment 1 there is a Margin question and I'm not sure how to figure it out?

During the year ended March 20X7, sales of 63,900 were made. The trader operated with a gross sales margin of 25%.

Calculate the cost of goods sold for the year ended 31 March 20X7.

and then

Purchases for the year were 46,795.

Calculate the value of closing inventory.

Not sure why I struggle so much with these kind of questions but if anyone could talk me through them I'd appreciate it as my exam is on Tuesday.

Comments

  • PlattPlatt Registered Posts: 4
    edited January 2015


    The image above should provide you with a good visual representation of what the first part of the question is about.

    Our sales figure of £63,900 is 100%. 25% of our sales is our margin (the difference between cost of sales, and sales). The remaining 75% is our cost of sales figure of £47,925.

    To calculate the value of the closing inventory, I think we would first need the value of the opening inventory. In this example, imagine our value of opening inventory was £5,850 (as this is the figure given in Task 2 of Sample Assessment 1 for this unit), and we'll use your purchases figure of £46,795.

    The formula for closing inventory is this:

    (Opening Inventory + Purchases) - Cost of sales = Closing Inventory

    So:

    (5850 + 46795) - 47925 = 4720

    Hope this helps!
  • amybu22amybu22 Registered Posts: 12
    Where did you get the opening inventory from? Can't see that figure anywhere
  • PlattPlatt Registered Posts: 4
    edited January 2015


    The table highlighted above shows the assets and liabilities as at 1 April 20X6. If the year end is 31 March 20X7, then an inventory figure at the beginning of the year (1 April 20X6) must be your opening inventory.
  • welshwizardwelshwizard Trusted Regular South WalesRegistered Posts: 465
    You're given the inventory figure as at 1 April 20X6 in the opening information before part (a).
  • amybu22amybu22 Registered Posts: 12
    Okay thanks you've really helped! Can I ask a quick Q, how come on some of the incomplete records accounts when it gives you opening and closing balances I've noticed sometimes it will say the opening bal is a credit, and then same for the closing balance even though it's not always right.
  • j1994j1994 Registered Posts: 106
    How do i calculate the value of sales ?the gross sale margin is 40%. Cogs is 64800 opening-5900,closing 6400,purchase 65300
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