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Simple GP question which I can't work out!!

Simple GP question which I can't work out!!

If costs increase by£10,000.00 per year how much extra do takings have to increase at 60%GP including VAT to cover the extra costs? 

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15th Mar 2012 08:10

Covering the additional overheads:

£10,000 / 40% = £25,000 (+ VAT)

 

If all goods are standard rated then this would be £25,000 * 6/5 = £30,000

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By mumpin
15th Mar 2012 08:11

I'd take a stab at...

20,833

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By 0098087
15th Mar 2012 08:16

Yes, it's a restaurant
 

Yes, it's a restaurant

 

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15th Mar 2012 09:10

Just checking

Do you mean that the 60% GP includes VAT?

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By 0098087
15th Mar 2012 09:23

yes

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15th Mar 2012 09:44

If that is so then surely the calculation is 60%GP  less VAT =50%

Then increased  Costs of £10000/50% = £20000 plus VAT = 24000 increased sales

Am I mad ??

 

 

Thanks (1)
By 0098087
15th Mar 2012 09:52

See what I mean about struggling to work it out!

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15th Mar 2012 09:59

In that case

Please can we clarify, how are you working out your Gross Margin of 60%.

 

Is it:

(a) Gross Profit (net of VAT) / Gross Sales (incl VAT)

(b) Gross Profit (incl VAT) / Gross Sales (Incl VAT)

(c) Other ... (please tell us)

 

And then, is the increase in costs of £10,000:

(a) Net of VAT, or

(b) Including VAT (if so how much VAT is in that figure?)

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15th Mar 2012 11:14

Infallible

The answer is £30k additional takings

The GP and costs are surely ex-VAT.

Assuming that to be the case, additional (net) sales of £25k generates £15k GP, ie. 60%

Add VAT to net sales to arrive at takings = £30k

cedar.financial, above, is correct.  

 

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By mumpin
15th Mar 2012 13:50

@ Andy...

...but why do you want to generate GP of £15k?

OP says cost increase of £10k.

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15th Mar 2012 14:07

@ mumpin

To generate GP of 60% (15/25*100)

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By blok
15th Mar 2012 14:09

.

I agree with the first poster and Andy,

mumpin. £15 is the result of £25 less £10. 

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15th Mar 2012 14:13

It all depends on what you mean by "60%GP including VAT"Sasl

If your costings are (as i Guess you mean):-

 

100  Gross Sales

  17 VAT

  83 Net Sales

  40 Direct Costs

  43  Gross Margin

Then an increase in costs of 10 means Gross Sales have to increase by 25 to keep the percentages the same

 

If you mean that Direct costs have gone up by 10 and you want the gross margin to stay at 43 then your net sales need to be 93 so gross sales 112. I am afraid your problems arise because you hae failed to define the question clearly 

 

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By mumpin
15th Mar 2012 15:05

but don't you think...

...OP means that the £10k is a fixed cost, so the calculation is more like doing a breakeven sum.

ie. 10k/0.6 = 16,667 which is 80% (ie net of Vat amount), therefore takings would be 20,833.

I still don't see why you're trying to get to £15k.

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By blok
15th Mar 2012 15:16

.

we are not tryng to get to £15, but £15 is the result.

the costs are £10k (we were told that)

income in £25k (we are told the margin, so we can work out the income by grossing up)

profit of £15k is the resultant GP.

 

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By blok
15th Mar 2012 15:30

.

There is no point in working out the GP if the cost is fixed.

 

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