ACCA Applied Knowledge · Financial Accounting · Incomplete records
Rafi's business records show opening inventory $8,000, closing inventory $11,000 and purchases $62,000. Sales were made at a constant mark-up of 25% on cost. What were sales for the year?
Sales were $73,750. Cost of sales is opening inventory 8,000 plus purchases 62,000 less closing inventory 11,000, which is $59,000. A 25% mark-up on cost means sales equal 59,000 multiplied by 1.25.
- A$73,750Correct
- B$76,250
- C$59,000
- D$70,000
Explanation
Cost of sales = 8,000 + 62,000 - 11,000 = 59,000. Sales = 59,000 x 1.25 = 73,750. Using 25% of sales as margin would give 78,667, and 76,250 is wrong because it adds 25% to purchases incorrectly.
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