Catherine O’Byrne‘s trade is seasonal.
Her monthly sales are 50% higher in the three summer months than in the other nine months of the year. She earns a gross margin of 25% in the summer months and 20% during the rest of the year.
If her total sales for the year ended 30 April were £283,500, her cost of sales for the same period was?
Select ONE answer:
- £212,625
- £222,075
- £223,256
- £226,800
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Not correct
- Correct
- Not correct
- Not correct
Answer 2 analysis:
- Let sales in the low season = X
- Therefore, Sales in the high season = 1.5X
- Total sales = £283,500 = (9 X) + (3 * 1.5X) = 13.5X
- Therefore X = £283,500 / 13.5 = £21,000
- Sales in 9 off-peak months = 9 * £21,000 = £189,000
- Sales in 3 summer months = 3 * £21,000 * 1.5 = £94,500
- 3 months – 9 months = Total Sales: £94,500 + £189,000 = £283,500
- Gross Profit Margin: 25% – 20%
- Gross Profit (sales * gross profit margin: £23,625 +£37,800
- Cost of Sales (sales – gross profit): £70,875 +£151,200 = £222,075
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