Question

Financial information is presented below:

Operating expenses                             $ 28,000

Sales returns and allowances 7,000

Sales discounts 3,000

Sales revenue 150,000

Cost of goods sold 91,000

The gross profit rate would be

A)0.65

B)0.27

C)0.33

D)0.35

Answer 1

Calculation of Gross Profit Rate:

Sales Revenue = $150,000

Less: Sales Returns =($7,000)

Less: Sales discounts =($3,000)

Less: Cost of Goods Sold = ($91,000)

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Gross Profit = $49,000

Gross profit ratio = (Gross profit / Sales ) x 100

= ($49,000/$150,000) x 100

= 32.66% or .3266 (32.66% is equal to 32.66/100 = .3266)

= .3266 rounded off to .33

So the answer is Option C 0.33

Explanation:

Gross profit is the profit derived by deducting Cost of Goods sold from Net Sales. So operating expenses won't be considered in the calculation of Gross Profit.