ACCA Applied Knowledge · Financial Accounting · Incomplete records
A trader sells goods at a mark-up of 25% on cost. Sales for the year were $90,000. What was the gross profit?
Gross profit is $18,000. A 25% mark-up on cost means sales equal 125% of cost, so cost of sales is $90,000 divided by 1.25, which is $72,000. Deducting this from sales gives gross profit of $18,000.
- A$22,500
- B$18,000Correct
- C$27,000
- D$72,000
Explanation
Mark-up 25% on cost means sales = 125% of cost. Cost of sales = 90,000 / 1.25 = 72,000, so gross profit = 90,000 - 72,000 = 18,000. The figure of 22,500 wrongly applies 25% to sales.
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