Cannot understand the calculation, help please!
oibkkfst
Registered Posts: 2
You have been provided with the following information.
The gross profit is £16,250
Markup 25% on cost
Opening inventory £5,550
Purchases £74,350
Calculate the value of sales.
The answer is 81,250. but for the life of me, cannot figure out the calculation
"Remember to break the gross profit down to 1%; if the cost of sales is based on 100%, then the value of sales has to be 125%. Have another go."
this does not help either, how can I find the cost of sales without closing inventory?
The gross profit is £16,250
Markup 25% on cost
Opening inventory £5,550
Purchases £74,350
Calculate the value of sales.
The answer is 81,250. but for the life of me, cannot figure out the calculation
"Remember to break the gross profit down to 1%; if the cost of sales is based on 100%, then the value of sales has to be 125%. Have another go."
this does not help either, how can I find the cost of sales without closing inventory?
0
Comments

Mark up is the value of the gross profit made in terms of cost of sales.
So if you have a X% mark up then you have 2 useful bits of information:
1) Gross Profit = X% of Cost of sales
2) Sales = (100+X)% of Cost of sales
So for the above question
16,250 = 25% Cost of sales
Cost of sales = 16250/0.25 = £65,000
Sales = 125% * 65,000 = 1.25 *65000 = £81,250
I hope this helps.
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