Registered User
#1

lets take for example that i sell a product for 1000 euro
the vat on this product is 21%
I would automatically assume that the vat owed on this item would be 210 euro
i.e. divide 100 into 1000 and then multiply by 21

sales value = 1000 euro
vat on sales= 210 euro

the accountant is telling me that the correct figure is 173.55
how is this possible?

what is the forumla to calculate target gp
ie have a product at 1 euro and want a target gp of 20%

thank you

Registered User
#2

Your accountant is correct -

to get the VAT content on 1000.00 gross you need to divide the 1000.00 by 1.21 = Net of Vat 826.44 X by 21% is 173.55

Hope this helps.

Sorry but I dont know how to calculate the GP.

Moderator
#3

What has this got to do with College Work?

Registered User
#4

but why do you have to do it that way

part of an assignment we had in dcu

surely if someone asks you what is 21 % of 1000 euro you would say 210 euro

its a bit confusing do ya think??

Registered User
#5

It is confusing alright. The question might of been worded badly.

I have a PC. Dont care how much it costs to build. But I want to break into the 1000 euro PC market with it. How much should I sell the PC to the shops for? taking into account they add on 21% VAT?

Obviously cant sell it for 1000 because they will add on VAT
1000 * 100/121 = 826.45 (Price to sell to the shops)

So when the shops go selling the PC, they add on 21% VAT.
826.45 * 121/100 = 1000 (Price to sell to customers)

Working out how much VAT is paid
826.45 * 21/100 = 173.55

Hope that helps. Its the kind of exam question that can take a few minutes to understand. Then another few to work out the answer.

Registered User
#6

sorry for digging up this old post but because its no1 on google i felt obligated to clarify.

( 100 / ( 100 + [VAT Rate] ) * [Final Price] = [Pre-VAT Price]
for example
( 100 / ( 100 + 17.5 ) ) * 84.99 = 72.33 (rounded)

i was doing some php code, here it is

\$recordtax=( 100 / ( 100 + \$vat ) * \$finalcost);
\$recordtax=\$finalcost-\$recordtax;

\$recordtax is the vat that was added