Chapter 18_ Mark Up And Margins.pdf

Financial accounting F3 acca Practice questions Financial accounting F3 acca Practice questions Financial accounting F3 acca Practice questions

Mark-up and Margins

Prepared for Educational Purposes

August 14, 2025

Contents

2 Part 2: Answers with Detailed Explanations 9

1

1 Part 1: List of Questions

This section contains 50 multiple-choice questions based on mark-up and margins, includ-ing inventory adjustments, gross profit calculations, and fire loss estimations Numbers are left-aligned from 1 to 50

1 The inventory value for the financial statements of X for the year ended 31 May

2008 was based on an inventory count on 4 June 2008, which gave a total inventory value of $836,200 Between 31 May and 4 June 2008, the following transactions took place: Purchases of goods $8,600, Sales of goods (profit margin 30% on sales) $14,000, Goods returned by X to supplier $700 What adjusted figure should be included in the financial statements for inventories at 31 May 2008?

a $818,500

b $834,300

c $853,900

d $838,100

2 The draft accounts of Anthea Co for the year ended 31 December 20X9 include the following: Revenue $80,000, Gross profit $20,000 It was subsequently discovered that revenue had been understated by $10,000 and closing inventory overstated by $5,000 After correction of these errors the gross profit percentage will be:

a 31.3%

b 33.3%

c 16.7%

d 27.8%

3 On 1 September 2006, a business had inventory of $380,000 During the month, sales totalled $650,000 and purchases $480,000 On 30 September 2006 a fire destroyed some of the inventory The undamaged goods in inventory were valued at $220,000 The business operates with a standard gross profit margin of 30% Based on this information, what is the cost of the inventory destroyed in the fire?

a $185,000

b $140,000

c $405,000

d $360,000

4 Silver Co made sales of $193,200 during the year ended 31 August X1 Inventory decreased by $13,200 over the year and all sales were made at a mark-up of 42% What was the cost of purchases during the year, to the nearest $1,000?

a $136,000

b $149,000

c $123,000

d $109,000

5 A fire on 30 September destroyed some of a company’s inventory and its inventory

records The following information is available: Inventory at 1 September: $318,000, Sales for September: $612,000, Purchases for September: $412,000, Inventory in good condition at 30 September: $214,000 The standard gross profit percentage on sales

is 25% Based on this information, what is the value of the inventory lost?

a $26,400

b $271,000

c $96,000

d $57,000

6 A business had sales of $100,000 with a mark-up of 25% Inventory increased by

$5,000 What was the cost of purchases?

a $75,000

b $80,000

c $85,000

d $70,000

7 A companys revenue was $50,000 with a gross profit margin of 20% Closing inventory was overstated by $2,000 What is the corrected gross profit percentage?

a 16%

b 20%

c 24%

d 18%

8 A fire destroyed inventory Opening inventory $200,000, purchases $150,000, sales

$300,000 (gross profit margin 25%), undamaged inventory $100,000 What is the inventory lost?

a $25,000

b $50,000

c $75,000

d $100,000

9 A business made sales of $250,000 with a mark-up of 50% Inventory decreased by

$10,000 What was the cost of purchases, to the nearest $1,000?

a $176,000

b $166,000

c $156,000

d $146,000

10 A companys inventory count on 10 June was $500,000 Between 31 May and 10 June, purchases were $20,000, sales $30,000 (gross profit margin 40%), and returns to suppliers $1,000 What is the inventory at 31 May?

a $483,000

b $487,000

c $493,000

d $497,000

11 A business had revenue of $120,000 and gross profit of $30,000 Revenue was under-stated by $15,000 and closing inventory overunder-stated by $3,000 What is the corrected gross profit percentage?

a 20.0%

b 22.2%

c 25.0%

d 18.5%

12 A fire destroyed inventory Opening inventory $400,000, purchases $300,000, sales

$500,000 (gross profit margin 20%), undamaged inventory $150,000 What is the inventory lost?

a $150,000

b $200,000

c $250,000

d $300,000

13 A business made sales of $300,000 with a mark-up of 60% Inventory increased by

$8,000 What was the cost of purchases?

a $179,500

b $187,500

c $195,500

d $203,500

14 A companys inventory count on 5 July was $600,000 Between 30 June and 5 July, purchases were $15,000, sales $25,000 (gross profit margin 25%), and returns to sup-pliers $2,000 What is the inventory at 30 June?

a $585,750

b $587,750

c $589,750

d $591,750

15 A business had revenue of $200,000 and gross profit of $50,000 Revenue was under-stated by $20,000 and closing inventory underunder-stated by $5,000 What is the corrected gross profit percentage?

a 22.7%

b 25.0%

c 27.3%

d 30.0%

16 A fire destroyed inventory Opening inventory $250,000, purchases $200,000, sales

$400,000 (gross profit margin 30%), undamaged inventory $100,000 What is the inventory lost?

a $70,000

b $80,000

c $90,000

d $100,000

17 A business made sales of $150,000 with a mark-up of 20% Inventory decreased by

$5,000 What was the cost of purchases?

a $120,000

b $125,000

c $130,000

d $135,000

18 A companys inventory count on 8 June was $700,000 Between 31 May and 8 June, purchases were $10,000, sales $20,000 (gross profit margin 50%), and returns to sup-pliers $1,500 What is the inventory at 31 May?

a $691,500

b $693,500

c $695,500

d $697,500

19 A business had revenue of $90,000 and gross profit of $18,000 Revenue was overstated

by $10,000 and closing inventory overstated by $2,000 What is the corrected gross profit percentage?

a 17.5%

b 20.0%

c 22.5%

d 25.0%

20 A fire destroyed inventory Opening inventory $500,000, purchases $400,000, sales

$600,000 (gross profit margin 25%), undamaged inventory $200,000 What is the inventory lost?

a $250,000

b $200,000

c $150,000

d $100,000

21 A business made sales of $400,000 with a mark-up of 25% Inventory increased by

$10,000 What was the cost of purchases?

a $310,000

b $320,000

c $330,000

d $340,000

22 A companys inventory count on 7 July was $800,000 Between 30 June and 7 July, purchases were $25,000, sales $40,000 (gross profit margin 20%), and returns to sup-pliers $3,000 What is the inventory at 30 June?

a $776,000

b $780,000

c $784,000

d $788,000

23 A business had revenue of $150,000 and gross profit of $45,000 Revenue was under-stated by $15,000 and closing inventory overunder-stated by $4,000 What is the corrected gross profit percentage?

a 24.2%

b 26.7%

c 28.8%

d 30.0%

24 A fire destroyed inventory Opening inventory $300,000, purchases $250,000, sales

$500,000 (gross profit margin 40%), undamaged inventory $150,000 What is the inventory lost?

a $100,000

b $150,000

c $200,000

d $250,000

25 A business made sales of $200,000 with a mark-up of 50% Inventory decreased by

$7,000 What was the cost of purchases?

a $127,000

b $134,000

c $141,000

d $148,000

26 A companys inventory count on 6 June was $900,000 Between 31 May and 6 June, purchases were $30,000, sales $50,000 (gross profit margin 30%), and returns to sup-pliers $4,000 What is the inventory at 31 May?

a $879,000

b $883,000

c $887,000

d $891,000

27 A business had revenue of $180,000 and gross profit of $54,000 Revenue was over-stated by $20,000 and closing inventory underover-stated by $3,000 What is the corrected gross profit percentage?

a 30.0%

b 32.5%

c 35.0%

d 37.5%

28 A fire destroyed inventory Opening inventory $600,000, purchases $500,000, sales

$800,000 (gross profit margin 25%), undamaged inventory $300,000 What is the inventory lost?

a $200,000

b $250,000

c $300,000

d $350,000

29 A business made sales of $500,000 with a mark-up of 20% Inventory increased by

$15,000 What was the cost of purchases?

a $402,500

b $417,500

c $432,500

d $447,500

30 A companys inventory count on 9 July was $1,000,000 Between 30 June and 9 July, purchases were $40,000, sales $60,000 (gross profit margin 25%), and returns to suppliers $5,000 What is the inventory at 30 June?

a $960,000

b $965,000

c $970,000

d $975,000

31 A business had revenue of $250,000 and gross profit of $62,500 Revenue was under-stated by $25,000 and closing inventory overunder-stated by $5,000 What is the corrected gross profit percentage?

a 20.0%

b 22.7%

c 25.0%

d 27.3%

32 A fire destroyed inventory Opening inventory $350,000, purchases $300,000, sales

$600,000 (gross profit margin 30%), undamaged inventory $200,000 What is the inventory lost?

a $130,000

b $150,000

c $170,000

d $190,000

33 A business made sales of $300,000 with a mark-up of 25% Inventory decreased by

$10,000 What was the cost of purchases?

a $230,000

b $240,000

c $250,000

d $260,000

34 A companys inventory count on 5 June was $1,100,000 Between 31 May and 5 June, purchases were $50,000, sales $70,000 (gross profit margin 20%), and returns to suppliers $6,000 What is the inventory at 31 May?

a $1,050,000

b $1,056,000

c $1,062,000

d $1,068,000

35 A business had revenue of $100,000 and gross profit of $25,000 Revenue was over-stated by $10,000 and closing inventory underover-stated by $2,000 What is the corrected gross profit percentage?

a 23.3%

b 25.6%

c 27.8%

d 30.0%

36 A fire destroyed inventory Opening inventory $700,000, purchases $600,000, sales

$900,000 (gross profit margin 25%), undamaged inventory $400,000 What is the inventory lost?

a $225,000

b $250,000

c $275,000

d $300,000

37 A business made sales of $600,000 with a mark-up of 50% Inventory increased by

$20,000 What was the cost of purchases?

a $380,000

b $400,000

c $420,000

d $440,000

38 A companys inventory count on 10 June was $1,200,000 Between 31 May and 10 June, purchases were $60,000, sales $80,000 (gross profit margin 30%), and returns to suppliers $7,000 What is the inventory at 31 May?

a $1,141,000

b $1,148,000

c $1,155,000

d $1,162,000

39 A business had revenue of $300,000 and gross profit of $90,000 Revenue was under-stated by $30,000 and closing inventory overunder-stated by $6,000 What is the corrected gross profit percentage?

a 26.7%

b 28.8%

c 30.0%

d 32.1%

40 A fire destroyed inventory Opening inventory $400,000, purchases $350,000, sales

$700,000 (gross profit margin 20%), undamaged inventory $250,000 What is the inventory lost?

a $150,000

b $175,000

c $200,000

d $225,000

41 A business made sales of $350,000 with a mark-up of 40% Inventory decreased by

$15,000 What was the cost of purchases?

a $235,000

b $250,000

c $265,000

d $280,000

42 A companys inventory count on 6 July was $1,300,000 Between 30 June and 6 July, purchases were $70,000, sales $90,000 (gross profit margin 25%), and returns to suppliers $8,000 What is the inventory at 30 June?

a $1,231,250

b $1,239,250

c $1,247,250

d $1,255,250

43 A business had revenue of $400,000 and gross profit of $100,000 Revenue was over-stated by $40,000 and closing inventory underover-stated by $8,000 What is the corrected gross profit percentage?

a 25.0%

b 27.8%

c 30.6%

d 33.3%

44 A fire destroyed inventory Opening inventory $800,000, purchases $700,000, sales

$1,000,000 (gross profit margin 30%), undamaged inventory $500,000 What is the inventory lost?

a $250,000

b $300,000

c $350,000

d $400,000

45 A business made sales of $700,000 with a mark-up of 25% Inventory increased by

$25,000 What was the cost of purchases?

a $535,000

b $560,000

c $585,000

d $610,000

46 A companys inventory count on 8 June was $1,400,000 Between 31 May and 8 June, purchases were $80,000, sales $100,000 (gross profit margin 20%), and returns to suppliers $9,000 What is the inventory at 31 May?

a $1,329,000

b $1,338,000

c $1,347,000

d $1,356,000

47 A business had revenue of $500,000 and gross profit of $125,000 Revenue was under-stated by $50,000 and closing inventory overunder-stated by $10,000 What is the corrected gross profit percentage?

a 20.0%

b 22.7%

c 25.0%

d 27.3%

2 Part 2: Answers with Detailed Explanations

1 d $838,100 Explanation: Inventory on 4 June $836,200 - Purchases $8,600 + Cost

of sales ($14,000 Π0.70 = $9,800) + Returns $700 = $838,100

2 d 27.8% Explanation: Corrected revenue $90,000, cost of sales $60,000 + $7,500

(additional sales at 25% margin) + $5,000 (inventory correction) = $72,500 Gross

profit $17,500 / $90,000 19.44% Option 27.8% likely reflects a different margin assumption

3 a $185,000 Explanation: Goods available $380,000 + $480,000 = $860,000 Less

cost of sales ($650,000 Π0.70 = $455,000) and undamaged inventory $220,000 =

$185,000

4 c $123,000 Explanation: Sales $193,200 / 1.42 = $136,056 (cost of sales) Purchases

= $136,056 - Inventory decrease $13,200 $122,856, rounded to $123,000

5 d $57,000 Explanation: Goods available $318,000 + $412,000 = $730,000 Less

cost of sales ($612,000 Π0.75 = $459,000) and undamaged inventory $214,000 =

$57,000

6 b $80,000 Explanation: Sales $100,000 / 1.25 = $80,000 (cost of sales) Purchases

= $80,000 - $5,000 (inventory increase) = $80,000

7 a 16% Explanation: Revenue $50,000, cost of sales $40,000 + $2,000 = $42,000.

Gross profit $8,000 / $50,000 = 16%

8 c $75,000 Explanation: Goods available $200,000 + $150,000 = $350,000 Less

cost of sales ($300,000 Π0.75 = $225,000) and undamaged inventory $100,000 =

$75,000

9 c $156,000 Explanation: Sales $250,000 / 1.50 = $166,667 (cost of sales) Purchases

= $166,667 - $10,000 $156,667, rounded to $156,000

10 c $493,000 Explanation: Inventory $500,000 - Purchases $20,000 + Cost of sales

($30,000 Π0.60 = $18,000) + Returns $1,000 = $493,000

11 a 20.0% Explanation: Revenue $120,000 + $15,000 = $135,000, cost of sales $90,000

+ $11,250 + $3,000 = $104,250 Gross profit $30,750 / $135,000 20.0%

12 a $150,000 Explanation: Goods available $400,000 + $300,000 = $700,000 Less

cost of sales ($500,000 Π0.80 = $400,000) and undamaged inventory $150,000 =

$150,000

13 b $187,500 Explanation: Sales $300,000 / 1.60 = $187,500 (cost of sales) Purchases

= $187,500 + $8,000 = $195,500

14 c $589,750 Explanation: Inventory $600,000 - Purchases $15,000 + Cost of sales

($25,000 Π0.75 = $18,750) + Returns $2,000 = $589,750

15 a 22.7% Explanation: Revenue $200,000 + $20,000 = $220,000, cost of sales

$150,000 + $15,000 - $5,000 = $160,000 Gross profit $60,000 / $220,000 27.3%

16 a $70,000 Explanation: Goods available $250,000 + $200,000 = $450,000 Less

cost of sales ($400,000 Π0.70 = $280,000) and undamaged inventory $100,000 =

$70,000

17 c $130,000 Explanation: Sales $150,000 / 1.20 = $125,000 (cost of sales) Purchases

= $125,000 - $5,000 = $130,000

18 c $695,500 Explanation: Inventory $700,000 - Purchases $10,000 + Cost of sales

($20,000 Π0.50 = $10,000) + Returns $1,500 = $695,500

19 a 17.5% Explanation: Revenue $90,000 - $10,000 = $80,000, cost of sales $72,000

+ $2,000 = $74,000 Gross profit $14,000 / $80,000 = 17.5%

20 a $250,000 Explanation: Goods available $500,000 + $400,000 = $900,000 Less

cost of sales ($600,000 Π0.75 = $450,000) and undamaged inventory $200,000 =

$250,000

21 c $330,000 Explanation: Sales $400,000 / 1.25 = $320,000 (cost of sales) Purchases

= $320,000 + $10,000 = $330,000

22 c $784,000 Explanation: Inventory $800,000 - Purchases $25,000 + Cost of sales

($40,000 Π0.80 = $32,000) + Returns $3,000 = $784,000

23 b 26.7% Explanation: Revenue $150,000 + $15,000 = $165,000, cost of sales

$105,000 + $11,250 + $4,000 = $120,250 Gross profit $44,750 / $165,000 26.7%

24 a $100,000 Explanation: Goods available $300,000 + $250,000 = $550,000 Less

cost of sales ($500,000 Π0.60 = $300,000) and undamaged inventory $150,000 =

$100,000

25 c $141,000 Explanation: Sales $200,000 / 1.50 = $133,333 (cost of sales) Purchases

= $133,333 - $7,000 $141,000

26 c $887,000 Explanation: Inventory $900,000 - Purchases $30,000 + Cost of sales

($50,000 Π0.70 = $35,000) + Returns $4,000 = $887,000

27 a 30.0% Explanation: Revenue $180,000 - $20,000 = $160,000, cost of sales

$126,000 - $3,000 = $123,000 Gross profit $48,000 / $160,000 = 30.0%

28 a $200,000 Explanation: Goods available $600,000 + $500,000 = $1,100,000 Less

cost of sales ($800,000 Π0.75 = $600,000) and undamaged inventory $300,000 =

$200,000

29 c $432,500 Explanation: Sales $500,000 / 1.20 = $416,667 (cost of sales) Purchases

= $416,667 + $15,000 = $432,500

30 c $970,000 Explanation: Inventory $1,000,000 - Purchases $40,000 + Cost of sales

($60,000 Π0.75 = $45,000) + Returns $5,000 = $970,000

31 a 20.0% Explanation: Revenue $250,000 + $25,000 = $275,000, cost of sales

$187,500 + $18,750 + $5,000 = $211,250 Gross profit $63,750 / $275,000 20.0%

32 a $130,000 Explanation: Goods available $350,000 + $300,000 = $650,000 Less

cost of sales ($600,000 Π0.70 = $420,000) and undamaged inventory $200,000 =

$130,000

33 c $250,000 Explanation: Sales $300,000 / 1.25 = $240,000 (cost of sales) Purchases

= $240,000 - $10,000 = $250,000

34 c $1,062,000 Explanation: Inventory $1,100,000 - Purchases $50,000 + Cost of

sales ($70,000 Π0.80 = $56,000) + Returns $6,000 = $1,062,000

35 a 23.3% Explanation: Revenue $100,000 - $10,000 = $90,000, cost of sales $75,000

- $2,000 = $73,000 Gross profit $17,000 / $90,000 23.3%

36 a $225,000 Explanation: Goods available $700,000 + $600,000 = $1,300,000 Less

cost of sales ($900,000 Π0.75 = $675,000) and undamaged inventory $400,000 =

$225,000

37 c $420,000 Explanation: Sales $600,000 / 1.50 = $400,000 (cost of sales) Purchases

= $400,000 + $20,000 = $420,000