Question

Assume Sheffield Company has the following reported amounts: Sales revenue $510,000, Sales returns and allowances $26,000, Cost of goods sold $331,500, and Operating expenses $82,000. Compute the following:

A) Net Sales

B)Gross Profit

C)income from operations

d)Gross profit rate

Answer 1

Answer to Part A:
Net Sales = Sales Revenue – Sales Returns and Allowances
Net Sales = $510,000 - $26,000
Net Sales = $484,000

Answer to Part B:
Gross Profit = Net Sales – Cost of Goods Sold
Gross Profit = $484,000 - $331,500
Gross Profit = $152,500

Answer to Part C:
Income from Operations = Gross Profit – Operating Expenses
Income from Operations = $152,500 - $82,000
Income from Operations = $70,500

Answer to Part D:
Gross Profit Rate = Gross Profit / Net Sales * 100
Gross Profit Rate = 152,500 / 484,000 * 100
Gross Profit Rate = 31.51%