Home For AAT student members AQ 2013 AAT Level 3 (Level 6 in Scotland)
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Profit Margins and Mark Ups

If I am given a inventory sales price and a sales percentage margin only, how can I find the cost price of the inventory?

e.g: inventory at selling prices is £240000

Sales Margin is £144000

what is the cost price of the inventory for the shops financial statements?

I know this is probably basic mathematic formulas but can anyone tell me what that formula is?

Thanks

Comments

  • camnixcamnix Registered Posts: 3
    Sales margin is 40% not 144000
  • PeterCPeterC Registered, Tutor Posts: 150
    This question is really about percentages, although you do need to know that
    Selling price = Cost price + profit

    If the sales margin is 60%, this means that the profit is 60% of the selling price.
    The other 40% of the selling price is the cost.

    The selling price of the inventory is £240,000
    40% of this is £144,000 so that is the cost
    camnix
  • camnixcamnix Registered Posts: 3
    This is what I came to it just seemed quite a large margin, but that clarifies the method I am using is correct.

    Many thanks
  • PeterCPeterC Registered, Tutor Posts: 150
    You're welcome

    For more information, see:
    media.wix.com/ugd/9a8e75_ff42b2bfe9e54dd393f4545e338d069e.pdf
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