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?

15th Mar 2012 07:55

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

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

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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

I'd take a stab at...

20,833

Yes, it's a restaurant

Yes, it's a restaurant

Just checking

Do you mean that the 60% GP

includesVAT?yes

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 ??

See what I mean about struggling to work it out!

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?)

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.

@ Andy...

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

OP says cost increase of £10k.

@ mumpin

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

.

I agree with the first poster and Andy,

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

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

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.

.

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.

.

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

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