At the end of the year,NewBiscuit company has inventory in hand at a selling price of £10,500.What was the cost of inventory assuming inventory is sold at a margin of 50%?
A) £5,250
B) £8,000
C) £3,000
D) £7,000

Question

Quizplus · Accepted Answer

The cost of inventory is calculated by taking the selling price and dividing it by 1 plus the margin (in this case, 50% or 0.5). So, £10,500 / (1 + 0.5) = £7,000. However, the correct calculation to find the cost when given the selling price and margin percentage (50%) is to understand that the selling price represents 150% of the cost (100% cost + 50% margin). Therefore, the cost is £10,500 / 1.5 = £7,000, indicating a mistake in the initial explanation. The correct answer, based on the correct understanding of margin calculation, should be £7,000, not £5,250.

At the End of the Year,NewBiscuit Company Has Inventory in Hand