ACCA Applied Knowledge · Financial Accounting · Incomplete records
A trader's sales for the year were $120,000 and cost of sales was $90,000. Which of the following correctly states the gross margin and the mark-up?
The gross margin is 25% and the mark-up is 33.3%. Gross profit is $30,000. Margin is measured against sales, so 30,000 over 120,000 is 25%, while mark-up is measured against cost, so 30,000 over 90,000 is 33.3%.
- AMargin 25%, mark-up 33.3%Correct
- BMargin 33.3%, mark-up 25%
- CMargin 25%, mark-up 25%
- DMargin 30%, mark-up 25%
Explanation
Gross profit = 120,000 - 90,000 = 30,000. Margin = 30,000/120,000 = 25% of sales. Mark-up = 30,000/90,000 = 33.3% of cost. The second option reverses the two bases.
Did you get it right without looking?
One question tells you little. A timed set on Incomplete records shows your real accuracy, how long you take and where you lose marks.
More Incomplete records questions
- A business has sales of $360,000 and a gross profit margin of 35%. Which of the following is the mark-up on cost, to the nearest whole perce…
- Mara, a sole trader, keeps no sales ledger. Opening trade receivables were $12,400 and closing trade receivables were $15,100. Cash received…
- Orrin's business paid rent of $9,600 in cash during the year. Rent prepaid at the start of the year was $1,200 and rent owing at the end of …
- A trader sells goods at a mark-up of 25% on cost. Sales for the year were $90,000. What was the gross profit?
- Perrin sells all goods at a uniform mark-up of 50% on cost. A fire destroyed part of the inventory. Opening inventory was $30,000, purchases…
- A trader sells goods at a mark-up of 25% on cost. What is the gross profit margin on sales?