FAPR VAT and Mark up question

wolfie1980
wolfie1980 Registered Posts: 3
in Final Accounts Preparation
Good morning all, I am struggling to get my head around the workings to a question on sample assessment 2. Any help will be most welcomed!

The question is ' The business sells it's goods at a mark up of 35%. The trader sells an item to a customer for £405 inc VAT there were no discounts. Calculate the original cost of the item to the trader excluding VAT.'

Thank you.

Comments

  • Casu
    Casu Registered, Users Awaiting Email Confirmation Posts: 102
    Mark up is the extra on top of the cos. so cos is the 100% figure. so then use your maths to work out the rest. Have a go
  • wolfie1980
    wolfie1980 Registered Posts: 3
    I've been having a go all morning and just can't get it. Keep getting £240 when CBT says £250, I can't see where I am going wrong :(
  • Casu
    Casu Registered, Users Awaiting Email Confirmation Posts: 102
    Think of your maths from school. Start by taking the vat off. What do get for that figure then?
  • Bertie
    Bertie Registered Posts: 376
    See attachment
  • Casu
    Casu Registered, Users Awaiting Email Confirmation Posts: 102
    Oh Bertie, I was going to get to that. Im a bit of a bugger for making students work for it, more than you! ;-)
  • Casu
    Casu Registered, Users Awaiting Email Confirmation Posts: 102
    Actually I might as well just to go the whole hog (well almost):-
    Margin eg 35% = sales 100%, cos 65%, GP 35%
    Markup eg 35% - sales 135%, cos 100%, GP 35%

  • Bertie
    Bertie Registered Posts: 376
    Lol.

    I didn't see your VAT post when I uploaded my attachment - my bad.
  • AlisonSwanson
    AlisonSwanson Registered, Tutor Posts: 209
    > @wolfie1980 said:
    > I've been having a go all morning and just can't get it. Keep getting £240 when CBT says £250, I can't see where I am going wrong :(

    If you are getting £240 you are deducting 20% from £405 to deduct the VAT which is incorrect.

    The £405 VAT inclusive amount includes the net sales price (100%) PLUS the VAT (20%). To take off the VAT you need to divide the £405 by 120 and then multiply by 100.
  • Casu
    Casu Registered, Users Awaiting Email Confirmation Posts: 102
    Or to get the net - start with £405 and take off the vat fraction of 1/6.

    1/6th of £405 = £67.50

    £405 - 67.50 = £337.50

    Just depends on what calculations you feel comfortable with. Which is why I asked that question first.

    How goes it now Wolfie?
  • wolfie1980
    wolfie1980 Registered Posts: 3
    Hello everyone, massive thanks to you all for your help! AlisonSwanson, you're right, that's where I have messed up!! I feel daft now, Sunday morning mind freeze I think :s

    Thanks again for all your responses, won't make that same mistake next week on the exam! =)

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