Question 1

A business has a uniform gross profit mark-up of 25% on cost. During the year, sales were $250,000, opening inventory was $30,000, and closing inventory was $40,000. What were the purchases for the year? (Enter numbers only)

Accepted Answer

1. Convert mark-up to margin or use the formula Cost of Sales = Sales / 1.25. 2. Use the Cost of Sales formula (Opening Inv + Purchases - Closing Inv = COS) to find Purchases.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Treating the 25% mark-up as a 25% margin on sales (which would give COS of $187,500).

A business has a uniform gross profit mark-up of 25% on cost. During the year, sales were $250,000, opening inventory was $30,000, and closing inventory was $40,000. What were the purchases for the year? (Enter numbers only)

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 4

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