Objective: To learn how to compute Margin, Markup and Rate of Inventory Turnover
3 parts SALES Cost of Sales Gross profit
MARGIN - Gross profit based on sales- Gross profit based on sales - expressed in %- expressed in %
MARGIN FORMULA: GP/SALES x 100%Margin = GP/SALES x 100%
Sales $ 30,000 Less: cost of sales 20,000 Gross profit 10,000 Margin = $ 10,000 $ 30,000 X 100% = 33.33%
Sales $ 25,000 Less: cost of sales 16,000 Gross profit 9,000 Margin = $ 9,000 $ 25,000 X 100% = 36%
Gross profit = Sales - COS = $ = $20 20 Margin = 20/100 x 100% = 20%
25% 100% 80% Gross profit = Sales x 25% = $
30% 100% 70% Gross profit = Sales x 30% = $ September Purchases
MARKUP - Gross profit based on cost- Gross profit based on cost - expressed in %- expressed in %
MARKUP FORMULA: GP/Cost of sales x 100% Margin = GP/Cost of sales x 100%
Sales $ 30,000 Less: cost of sales 20,000 Gross profit 10,000 Markup = $ 10,000 $ 20,000 X 100% = 50%
Sales $ 25,000 Less: cost of sales 16,000 Gross profit 9,000 Markup = $ 9,000 $ 16,000 X 100% = 56.25%
Gross profit = Sales - COS = $ = $20 20 Markup = 20/80 x 100% = 25%
25% 125% 100% Cost of sales = Sales 1.25 = $
30% 130% 100% Cost of sales = Sales 1.3 = $ Sept Purchases
RATE OF INVENTORY TURNOVER -No of times a business places its inventory in a given period of time -Expressed in x times-Expressed in x times
RATE OF INVENTORY TURNOVER FORMULA: RITO = Cost of Sales / average inventoryCost of Sales / average inventory RITO = Cost of Sales / average inventoryCost of Sales / average inventory Average inventory = (inventory opening + inventory closing) / 2= (inventory opening + inventory closing) / 2 Average inventory = (inventory opening + inventory closing) / 2= (inventory opening + inventory closing) / 2
$25 6x
$10 10x
Ave Inventory = ($36+24) / 2 = $30 Cost of sales = Sales / 1.4 = $214 Sales Less: cost of sales Gross profit $300 ? ? ? ? 140% 100% 40% 214 RITO = 7.13x or 7x
20% 120% 100% 100 Cost of sales = Sales / 1.2 = $ Ave Inventory = ($25+15) / 2 = $40 RITO = 5x
x
Sales Less: cost of sales Gross profit Inv. 1 Aug Add: Purchases Total Inv. 31 July Inv Loss on fire Klaus, Trading Account For the year ended 31 July 2013
Sales Less: cost of sales Gross profit 1,600 Inv. 1 Aug Add: Purchases Total Inv. 31 July Inv Loss on fire Klaus, Trading Account For the year ended 31 July 2013
Sales Less: cost of sales Gross profit 1,600 Inv. 1 Aug 39,200 Add: Purchases Total Inv. 31 July Inv Loss on fire Klaus, Trading Account For the year ended 31 July 2013
Sales Less: cost of sales Gross profit 1,600 Inv. 1 Aug 39,200 Add: Purchases Total Inv. 31 July Inv Loss on fire Klaus, Trading Account For the year ended 31 July ,000
Sales Less: cost of sales Gross profit 1,600 Inv. 1 Aug 39,200 Add: Purchases Total Inventory loss Inv. 31 July Klaus, Trading Account For the year ended 31 July ,
Sales Less: cost of sales Gross profit 1,600 Inv. 1 Aug 39,200 Add: Purchases Total Klaus, Trading Account For the year ended 31 July , % 100% 25% 38,400 9,600 40,800 1,700 Less: Inv Loss Inv. 31 July
Sales Less: cost of sales Gross profit 9,500 Inv. 1 Apr 22,000 Add: Purchases Total Jacky Chan, Trading Account For the year ended 31 March , % 80% 20% 14,000 3,500 31,500 17,500 Less: Inv 31 May Exercise 17 6,600 10,900
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