Question

Selected account balances from a retail firm’s adjusted trial balance at the end of the first quarter of operations for the current fiscal year include the following:

Based solely on the account information provided, what was the gross profit ratio for the quarter?

	a.	59.0%
	b.	3.1%
	c.	41.0%
	d.	4.4%

• Sales……………………………………………………$32,000,000
• Executive & administrative salary expense…………… $4,200,000
• Sales salary expense…………………………………… $1,400,000
• Sales commissions……………………………………...  $1,800,000
• Cost of goods sold…………………………………….. $18,880,000
• Advertising expense…………………………………….  $1,500,000
• Utility expense…………………………………………..    $190,000
• Depreciation expense……………………………………    $210,000
• Rent expense……………………………………………. $2,100,000
• Insurance expense……………………………………….    $320,000
• Income tax expense……………………………………...    $420,000

Selected account balances from a retail firm’s adjusted trial balance at the end of the first quarter of operations for the current fiscal year include the following:

Based solely on the account information provided, what was the net profit margin for the quarter?

	a.	59.0%
	b.	3.1%
	c.	41.0%
	d.	4.4%

• Sales……………………………………………………$32,000,000
• Executive & administrative salary expense…………… $4,200,000
• Sales salary expense…………………………………… $1,400,000
• Sales commissions……………………………………...  $1,800,000
• Cost of goods sold…………………………………….. $18,880,000
• Advertising expense…………………………………….  $1,500,000
• Utility expense…………………………………………..    $190,000
• Depreciation expense……………………………………    $210,000
• Rent expense……………………………………………. $2,100,000
• Insurance expense……………………………………….    $320,000
• Income tax expense……………………………………...    $420,000

Answer 1

1
Sales	32000000
Less: Cost of goods sold	18880000
Gross Profit	13120000
Gross Profit	13120000
Divide by Sales	32000000
Gross Profit ratio	41.0%
Option C 41.0% is correct
2
Sales	32000000
Less: Cost of goods sold	18880000
Gross Profit	13120000
Less: Expenses
Executive & administrative salary expense	4200000
Sales salary expense	1400000
Sales commissions	1800000
Advertising expense	1500000
Utility expense	190000
Depreciation expense	210000
Rent expense	2100000
Insurance expense	320000
Income tax expense	420000
Total expenses	12140000
Net Profit	980000
Net Profit	980000
Divide by Sales	32000000
Net profit margin	3.1%
Option B 3.1% is correct