Task 7 (I think)
EmilyRose
AAT Student, AATQB Posts: 11
How would you work out sales revenue from the below information.
Inventory holding days- 45 days
Inventory- £252000
Gross profit margin is 20%
Work out
Sales revenue
Cos
Gross profit
I did it one way, hummed and harred and changed it at the last minute. Just wanted to know if what I did was right or wrong!
TIA
Inventory holding days- 45 days
Inventory- £252000
Gross profit margin is 20%
Work out
Sales revenue
Cos
Gross profit
I did it one way, hummed and harred and changed it at the last minute. Just wanted to know if what I did was right or wrong!
TIA
0
Best Answer
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Unless I'm mistaken Sunflower, the inventory holding day calculation involves COS, not sales. So the £2,044,000 figure you calculated is not the sales revenue figure but the COS.
Given that gross profit is 20%, sales revenue must be 100% and COS must be 80%. To find the sales revenue, we need to divide COS by 0.8, which gives us £2,555,000.
Finally, we find 20% of the sales revenue to get the gross profit, which is £511,000.
Sales revenue - £2,555,000
COS - £2,044,000
Gross profit - £511,000Matthew Dearlove MAAT
Currently on CIMA Management Level. Passed P2, F2 and E2. Preparing for November 19 MCS.5
Answers
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Inventory is £252000 and inventory days is 45 - from this information we can calculate the sales figure:- 45 days out of 365 (a full year) so 252000 divided by 45 multiplied by 365 gives £2044000 sales.
We are given the gross profit margin which is a percentage of sales 20% of £2044000 = £408,800, therefore the cost of sales = £1635200 (80%).
Let me know if you got the same figures.0 -
Thank you both for your responses. In the exam I first did it how sunflower explained and changed it last minute to Cheesepeasys solution. Fingers crossed it’s correct as there was a lot of other calculations based on the solution of this one.
Thanks again
Emily0
