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Did my exam today and need help!

kellyprestonkellypreston AAT Student Posts: 18
edited October 2018 in Management Accounting: Decisions and Control
I got completely thrown off a question when I needed to calculate sales from the following information:
Inventory holding period
Inventory
Gross profit margin
Net assets

Can someone please explain/provide a formula I would use to calculate sales based on this?I know you can calculate cost of sales from inventory and inventory holding period but then I got completely lost.

Can someone also tell me if AAT give you follow through marks? Because I made up a figure for sales so I could answer the other questions
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Comments

  • mergenmergen Just Joined Registered Posts: 86
    Think of Profit and Loss statement and how it looks. What comes first and then work your way down.
    You've got Inventory Holding Period = Inventory/C of Sales x 365. Once you've got Cost of Sales, you can work your way up to Sales.
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  • kellyprestonkellypreston AAT Student Posts: 18
    But how? That’s what I’m stuck on. How do you get from cost of sales back to sales? I know you have gross profit margin but that’s a percentage not a number. Sorry if I’m being stupid here
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  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 441
    Hello,
    Made up example:

    Inventory Holding: 20 Days
    Closing Inventory: £ 10,000
    Gross Profit Margin: 20%

    First work out missing pruchases figure: £ 10,000/20 Days * 365 Days = £ 182,500
    Then Add Gross Margin to arrive at Sales £ 182,500 / 0.8 = £ 228,125

    Hope this helps.
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  • fournaanjezfournaanjez Registered Posts: 32
    Re-arrange inventory holding period to find COS.

    Then if you know the gross profit margin is, for example, 20% you can find sales by multiplying COS by what you want by what you've got ie 100/80. This will give you a sales figure.

    With regards to the follow through marks, I have no idea sorry. I should imagine if it is a human marked part of the exam that there would be, but can't give you any guarantee.
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  • kellyprestonkellypreston AAT Student Posts: 18
    I see! Thanks everyone, I will now know for next time :)
    fournaanjez
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  • mergenmergen Just Joined Registered Posts: 86
    @kellypreston sorry was rushing trying to type and miss read your post. I read it as Gross Profit and didnt see margin. What the guys above have said.
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  • charlotte1234charlotte1234 Registered Posts: 8
    I'm so glad i'm not the only one who didn't get this question. I can't remember how I answered but this question could be the difference between me passing or failing.....I should get my result tomorrow but I will keep you answers in mind if I need to retake and definitely prepare for this!
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