Financial information is presented below: Operating expenses $21000 Sales returns and...

Question:

Financial information is presented below:

Operating expenses $21000
Sales returns and allowances 7000
Sales discounts 3000
Sales revenue 168000
Cost of goods sold 99000

The gross profit rate would be

A. 0.42.

B. 0.63.

C. 0.37.

D. 0.35.

Gross profit

Gross profit is the excess of net sales over necessary costs in producing the product, either direct or indirect. Such costs include fixed costs and variable costs.

Answer and Explanation:

Answer : C. 0.37

The gross profit rate is the ratio of gross profit over the net sales and would be computed as follows:

Sales revenue $168,000
Less: Sales returns and allowances 7,000
Less: Sales discounts 3,000
Net sales 158,000
Less: Cost of goods sold 99,000
Gross profit $59,000
Gross profit rate (Gross profit / Net sales) 0.37

Learn more about this topic:

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How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
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