Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control

Assessment 1 Task 6 Decision &Control

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

Answers

  • silia85silia85 Registered Posts: 15
    edited October 20
    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 :-)

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