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Question 1 Assume 007 Inc. made sales of $891.3 million during 2016. Cost of goods sold...

Question 1

Assume 007 Inc. made sales of $891.3 million during 2016. Cost of goods sold for the year totaled

$581.2 million. At the end of 2015, 007 Inc. inventories stood at $190.4 million, and the company ended 2016 with inventory of $232 million. Compute 007’s gross profit percentage and rate of inventory turnover for 2016.

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Answer #1

Sales = $891.3 million

Cost of goods sold = $581.2 million

Beginning inventory = $190.4 million

Ending inventory = $232 million

Gross profit = Sales - Cost of goods sold

= 891.3 million - 581.2 million

= $310.1 million

Gross profit percentage = Gross profit/Sales

= 310.1/891.3

= 34.79% (Rounded to two decimals)

Average inventory = ( Beginning inventory + Ending inventory)/2

= (190.4 million + 232 million)/2

= $211.2 million

Rate of inventory turnover = Cost of goods sold/Average inventory

= 581.2/211.2

= 2.75 times (Rounded to two decimals)

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