Margins & Mark ups

Options
vickyhoepfner
vickyhoepfner Registered Posts: 1
in Final Accounts Preparation
Hello I am trying to get my head around margins and mark-ups and thought I was getting there until this question came up. Can anyone help with how I find out the COS and Sales revenue:

GP = £16250, Mark up is 25%, Opening Inventory = £5,550, Purchases = £74,350.

I need to calculate the Closing inventory figure and COS and Sales revenue.

Please help :anguished:

Comments

  • deanc1582
    deanc1582 Registered Posts: 9
    Options
    Hi There,

    Im not the greatest at explaining but I'll do my best to try help out.

    Given what you know about the mark up we can use the following:

    Sales revenue 125%
    Cost of Sales 100%
    Profit 25%

    using the figure we have for profit and using the above percentages we get the figures:

    Sales revenue £ 81250
    Cost of sales £ 65000
    Profit £ 16250

    Now we can look to calculate closing inventory, which we work out by adding our figures into the following equation:
    Opening inventory + Purchases - Closing Inventory = Cost of Sales

    From what we have already done and have been told, we can fill all of this in except from the Closing inventory. Below is the equation with figures we have added in.

    £5550 + £74350 - Closing Inventory = £65000

    Therefore if we tidy this up a little.

    £79900 - Closing Inventory = £65000

    By switching around the equasion we find that

    £79900 - £65000 = £14900

    We now have all requested figures:
    Closing inventory £14900
    Cost of sales £65000
    Sales £81250

    This may seem very long winded but I tried to identify each step clearly showing where all figures came from. (Possible this is wrong as its been a while since i've studied)

Categories

Privacy Policy