Copyright

A company shows the following balances: Cost of goods sold $900,000 Sales 2,000,000 Sales...

Question:

A company shows the following balances:

Cost of goods sold $900,000

Sales 2,000,000

Sales discounts 25,000

Sales returns and allowances 225,000

What is the gross profit margin?

a. 49.3%

b. 48.6%

c. 55.0%

d. 42.5%

Gross Profit Margin:

When the gross profit (the difference between the net sales revenue and the cost of good sold expense) is expressed as a percentage of sales, the result is called the gross profit margin. This margin is useful for comparison between reporting periods and between divisions and companies.

Answer and Explanation:


The gross profit mrgin is:

Sales $2,000,000
Sales discounts (25,000)
Sales returns and allowances (225,000)
Net Sales Revenue $1,750,000
Cost of goods sold (900,000)
Gross profit $850,000

Gross profit margin ||$48.6%
($850,000 / $1,750,00)


Learn more about this topic:

Loading...
How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
12K

Related to this Question

Explore our homework questions and answers library