Assessment 1 Task 6 Decision &Control
Comments
-
Written out the material becuase it was awkward to read on my computer.
Inventory 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
AAT Level 4, MAAT
ACCA in progress
F4- Passed Aug 2020
F5- Passed Dec 2020
F6- Passed Sep 2020
F7- Passed June 2021
F8 - Passed Sep 2021
F9 - Passed June 2021
SBL -
SBR - Passed Mar 22
ATX - Passed Dec 21
APM - Passed June 220 -
Thank you, I get the COS calculation but not the rest?0
-
No problem I'll go through it in more detail.
Gross 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 SalesAAT Level 4, MAAT
ACCA in progress
F4- Passed Aug 2020
F5- Passed Dec 2020
F6- Passed Sep 2020
F7- Passed June 2021
F8 - Passed Sep 2021
F9 - Passed June 2021
SBL -
SBR - Passed Mar 22
ATX - Passed Dec 21
APM - Passed June 220 -
thankyou, that's a big help.Pian32 said:No problem I'll go through it in more detail.
Gross 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
I really hope one like this doesn't come up on the exam.....0 -
It's fairly likely I think. GPM is a very common ratio to need to use. Where you get the figures from could vary though.AAT Level 4, MAAT
ACCA in progress
F4- Passed Aug 2020
F5- Passed Dec 2020
F6- Passed Sep 2020
F7- Passed June 2021
F8 - Passed Sep 2021
F9 - Passed June 2021
SBL -
SBR - Passed Mar 22
ATX - Passed Dec 21
APM - Passed June 220
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 18.9K For AAT students
- 268 NEW! Qualifications 2022
- 147 General Qualifications 2022 discussion
- 9 AAT Level 2 Certificate in Accounting
- 44 AAT Level 3 Diploma in Accounting
- 65 AAT Level 4 Diploma in Professional Accounting
- 8.9K For accounting professionals
- 23 coronavirus (Covid-19)
- 274 VAT
- 92 Software
- 274 Tax
- 138 Bookkeeping
- 7.3K General accounting discussion
- 194 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 352 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 590 Job postings
- 17 Who can benefit from AAT?
- 36 Where can AAT take me?
- 44 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 65 AAT membership