Kemi, a retail trader who keeps incomplete accounting records, recorded total sales of \te… — JAMB UTME

Kemi, a retail trader who keeps incomplete accounting records, recorded total sales of $\text{₦}75,000$ for the trading period. She fixes her selling prices using a mark-up of $25\%$ on cost. What is the Cost of Goods Sold in Naira?

Answer: 60000 ₦

Answer

The Cost of Goods Sold is ₦60,000.

To find the Cost of Goods Sold from total sales revenue when mark-up on cost is given, convert the

25\%

mark-up (

1/4

) into a margin on sales of

20\%

(

1/5

). Applying the

20\%

margin to total sales of

\text{₦}75,000

gives a gross profit of

\text{₦}15,000

. Subtracting gross profit from total sales results in a Cost of Goods Sold of

\text{₦}60,000

. Alternatively, since

\text{Sales} = \text{Cost} \times (1 + \text{Mark-up}) = 1.25 \times \text{Cost}

, dividing

\text{₦}75,000

1.25

directly gives

\text{₦}60,000

Step-by-Step Solution

Convert mark-up on cost to margin on sales

Margin = 20%

Mark-up is based on cost, while total sales represents selling price. Converting mark-up (

25\%

) to margin yields

\frac{0.25}{1 + 0.25} = 0.20

(

20\%

Determine Gross Profit from Sales

Gross Profit = ₦15,000

Gross Profit is calculated by multiplying the margin percentage by total sales:

20\% \times \text{₦}75,000 = \text{₦}15,000

Subtract Gross Profit from Sales to find Cost of Goods Sold

Cost of Goods Sold = ₦60,000

Cost of Goods Sold is equal to Total Sales minus Gross Profit:

\text{₦}75,000 - \text{₦}15,000 = \text{₦}60,000

Key Concept

Relationship between Mark-up, Margin, and Cost of Goods Sold

Question

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