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WAEC Financial Accounting 1997 Question 21

Question 21

Branch Accounts

A company charges out goods to a branch at cost plus 25 percent. It invoiced N12,000 worth of goods.
The mark-up is

  1. A.N15,000
  2. B.N9,000
  3. C.N4,000
  4. D.N3,000
  5. E.N2,400.
Show the answer and explanation

Answer: E (N2,400.)

Explanation

Goods sent to the branch are invoiced at cost plus 25%, so the invoice price of N12,000 is 125% of cost. The mark-up is 12,000 × 25/125 = N2,400 (cost N9,600).