# Assessment 1 Task 6 Decision &Control

EMMAHUTCHESON
Registered Posts:

**4**
Can anyone help with how to work out the sales figure from this question please?

0

EMMAHUTCHESON
Registered Posts: **4**

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

0

## Answers

260Inventory Holding Period = 45 days (IHP)

Average Inventory = £225,000

Gross Profit Margin = 20%

Selling cost = 2% Sales

Admin cost = 3.5% sales

Net assets = £1837000

There are 2 steps to calculating the sales first you need to get the cost of sales which you can do from the inventory holding equation.

IHP = Inventory/Cost of sales *365

Cost of sales = Inventory/IHP *365

Cost of sales = 1,825,000

From this you can calculate the sales from the profit margin remembering that the Gross Profit = Sales - Cost of Sales. (Make sure you don't forget the *100 if working in %ages.

Profit Margin = Gross Profit/Sales *100 (%)

Sales * Profit Margin = (Sales - cost of sales)*100

Sales *20/100 = Sales - 1825000

0.8 Sales = 1,825,000

Sales = 2,281,250

ACCA in progress

F4- Passed Aug 2020

F5- Planned for Dec 2020

F6- Passed Sep 2020

F7

F8

F9

4260Gross Profit Margin (%)= Gross Profit / Sales * 100

Combine this with

Gross Profit = Sales - Cost of Sales

Gross Profit Margin (%) = (Sales - Cost of sales) / Sales * 100

Divide both side by 100 which converts the margin to a decimal. Using the numbers from the question 20% -> 0.2

Gross Profit Margin (decimal) = (Sales - COS) / Sales

Rearrange the equation to get sales:

Sales * GPM = Sales - COS

COS + Sales * GPM = Sales

COS = Sales - Sales * GPM

Sales * (1-GPM) = COS

Sales = COS / (1-GPM)

Plug in the numbers:

Sales = 1,825,000 / (1-0.2)

= £ 2,281,250

It's all about rearranging formulea and merging equations where appropiate. You could technically cut out calculating the COS as well.

Effectively if the Gross profit margin is X% then the COS will be (100-X)% of Sales

ACCA in progress

F4- Passed Aug 2020

F5- Planned for Dec 2020

F6- Passed Sep 2020

F7

F8

F9

14I really hope one like this doesn't come up on the exam.....

260ACCA in progress

F4- Passed Aug 2020

F5- Planned for Dec 2020

F6- Passed Sep 2020

F7

F8

F9