Assessment 1 Task 6 Decision &Control

EMMAHUTCHESON

Can anyone help with how to work out the sales figure from this question please?

silia85

Hi @EMMAHUTCHESON ,

It's not the fastest way, but let's try :-)

We have been provided with the following information:

Inventory holding period - 45 days
Inventory - £225,000
Gross profit margin - 20%

The following formula can be used to calculate the missing sales value:

GP%= Gros Profit/sales
Gross Profit = Sales - cost of sales

However, we also do not know the value of the cost of sales (CoS)

To calculate the cost of sales, we can use the following formula

Inventory holding period = (Inventory/Cos of sales)*365

45days=(225,000/cost of sales)*365
45days = 225000*365/Cost of sales
45 Cost of sales = 82,125,000
Costs of sales = 1,825,000

To calculate Sales:

GP% = GP/Sales
GP%= (Sales - costs of sales)/sales

20%=( sales - £1,825,000)/sales
1/5 sales = sales - costs of sales
sales - 1/5 sales = costs of sales
5/5 sales - 1/5sales = CoS
4/5 sales = CoS
4/5 sales = £1,825,000
Sales= £1,825,000*5/4
sales = £2,281,250


I hope this helps :-)