Excise duty is £2.23 per bottle,VAT is 20%,retailers gross margin is 25% and other costs such as packaging and transport add 56p to the cost of each bottle.
How much is the wine worth in:
£5 bottle
£10 bottle
£20 bottle
Many thanks in advance for any help..
Does this work:
for a £5 bottle, subtract VAT: £4
Subtract gross margin of 25% (£1): £3
Subtract shipping: £2.44
Subtract excise duty of £2.23: leaves 21p for the wine.
^^ 4.17
Deduct 25% margin - once again this is 25% of the cost to store price
4.17 x 25/125 = 83.4p
4.17 - 83p = 3.34
3.34 - 0.56 costs per bottle = 2.78
2.78 - 2.23 duty = 0.55
55p wine per 5 pound bottle
I appreciate your workings BUt I don't understNd how shipping is £2.44 when it says costs such as packaging and transport add 56p to the cost of each bottle.
ALSO JJ109..how would I work out the £10 and £20 bottle please... I am totally confused...
JJ109..that is unbelievable and I bow to your knowledge..sorry to be a pain but I don't understand why the gross margin profit is 25% and you have written it as 25/125 which makes it one fifth and not a quarter!Totally confused....But you have really walked me through it very clearly apart from that.
Let z = the price of the good before tax
Therefore the tax = 20% x z
The price of the good after VAT is added is 5 pounds (given in the question)
Therefore The good + the tax = 5 pounds, or
Z + 20% Z = 5 pounds
20% is another way of saying 1/5
Therefore z + 1/5 z = 5 pounds
6/5 z = 5 pounds
z = 5 pounds x 5/6
z = 25/6
z = 4 .1667
z = 4.17 rounding to 2 decimal places
You have to remember VAT is 20% of the price BEFORE the Vat is added. It is not 20% of the final price.
Am totally in awe of your knowledge and clear explanation..many thanks for expertise help..
I will now leave you alone
Wishing you a very happy and healthy New Year!!!