Shobna sells sewing machines at a retail price of £520, which gives her a gross profit margin of 25%.During her trading year ended 31 March 20X9, she sold 420 machines, and moved to larger premises so that she could carry more inventory.At 31 March 20X9 her closing inventory (50 machines) is 100% higher than her opening inventory. Assuming no change in the cost and selling price structure, what was the value of Shobna's purchases during the year ended 31 March 20X9?

Question

Quizplus · Accepted Answer

The correct answer is A.The gross profit margin is 25%, so the cost of each machine is £520 x 75% = £390.The opening inventory was 25 machines, and the closing inventory was 50 machines, so the purchases during the year were 420 + 50 - 25 = 445 machines.The total cost of the purchases was £390 x 445 = £173,550.

Shobna Sells Sewing Machines at a Retail Price of £520