2. Objective: To learn how to compute Margin, Markup and Rate of Inventory Turnover

3. 3 parts SALES Cost of Sales Gross profit

4. MARGIN - Gross profit based on sales- Gross profit based on sales - expressed in %- expressed in %

5. MARGIN FORMULA: GP/SALES x 100%Margin = GP/SALES x 100%

7. Sales $ 30,000 Less: cost of sales 20,000 Gross profit 10,000 Margin = $ 10,000 $ 30,000 X 100% = 33.33%

8. Sales $ 25,000 Less: cost of sales 16,000 Gross profit 9,000 Margin = $ 9,000 $ 25,000 X 100% = 36%

9. Gross profit = Sales - COS = $100-80 = $20 20 Margin = 20/100 x 100% = 20%

10. 25% 100% 80% Gross profit = Sales x 25% = $50 50 150 180 170

11. 30% 100% 70% Gross profit = Sales x 30% = $210 210 490 580 555 1 September Purchases

12. MARKUP - Gross profit based on cost- Gross profit based on cost - expressed in %- expressed in %

13. MARKUP FORMULA: GP/Cost of sales x 100% Margin = GP/Cost of sales x 100%

15. Sales $ 30,000 Less: cost of sales 20,000 Gross profit 10,000 Markup = $ 10,000 $ 20,000 X 100% = 50%

16. Sales $ 25,000 Less: cost of sales 16,000 Gross profit 9,000 Markup = $ 9,000 $ 16,000 X 100% = 56.25%

17. Gross profit = Sales - COS = $100-80 = $20 20 Markup = 20/80 x 100% = 25%

18. 25% 125% 100% Cost of sales = Sales  1.25 = $160 40 160 190 180

19. 30% 130% 100% Cost of sales = Sales  1.3 = $538 538 162 628 603 1 Sept Purchases

20. 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

21. 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

23. $25 6x

24. $10 10x

25. 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

26. 20% 120% 100% 100 Cost of sales = Sales / 1.2 = $100 20 15 90 Ave Inventory = ($25+15) / 2 = $40 RITO = 5x

27. 90 60 25 35 3x

29. 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

31. 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

33. 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

35. 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 48,000

37. 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 2013 48,000 700

39. 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 2013 48,000 700 125% 100% 25% 38,400 9,600 40,800 1,700 Less: Inv Loss Inv. 31 July

41. 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 2014 17,500 100% 80% 20% 14,000 3,500 31,500 17,500 Less: Inv 31 May Exercise 17 6,600 10,900

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