ACCA Applied Knowledge · Financial Accounting · Incomplete records
Marlow earns a gross margin of 30% on sales. Cost of sales for the year was $175,000. Operating expenses were $40,000. What was Marlow's profit for the year?
Profit was $35,000. Cost of sales represents 70% of sales, so sales are $250,000 and gross profit is $75,000. Deducting operating expenses of $40,000 leaves a profit of $35,000.
- A$35,000Correct
- B$75,000
- C$10,000
- D$32,500
Explanation
Cost of sales is 70% of sales, so sales = 175,000 / 0.7 = 250,000. Gross profit = 75,000. Profit = 75,000 - 40,000 = 35,000. $75,000 is gross profit before expenses; $32,500 wrongly takes the margin as 30% of cost-based sales.
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 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 …
- 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 …
- Dalton sells goods at a mark-up of 40% on cost. Sales for the year were $224,000. Opening inventory was $18,000 and closing inventory was $2…
- A trader sells goods at a mark-up of 25% on cost. Sales for the year were $90,000. What was the gross profit?
- Marisol, a sole trader, has no drawings records. Opening net assets were $50,000 and closing net assets were $68,000. She introduced additio…
- 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…