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WAEC Financial Accounting 2014 Question 21

Question 21

Incomplete Records

Use the following information to answer questions 21 and 22.
The total sales of a business was GH¢ 2,160,000. The average mark-up for the year was 50%.
The gross profit is

  1. A.GH¢ 2,160,000.
  2. B.GH¢ 1,440,000.
  3. C.GH¢ 1,080,000.
  4. D.GH¢ 720,000.
Show the answer and explanation

Answer: D (GH¢ 720,000.)

Explanation

A 50% mark-up on cost means sales are 150% of cost, so gross profit is 50/150 = ⅓ of sales: 2,160,000 ÷ 3 = GH¢720,000.