# 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.

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)