Question

Given the following information for the year ended 12/31/X3: Sales Revenues ($210,000); Selling and Administrative Expense...

Given the following information for the year ended 12/31/X3: Sales Revenues ($210,000); Selling and Administrative Expense $42,000; Sales Discounts $6,000; Sales Returns and Allowances $11,000; Cost of Goods Sold $125,000; Interest Expense $4,000. Determine the 20X3 gross margin

The answer is 68000 but I want to know how that value was derived, thank you

Homework Answers

Answer #1

Gross margin = Net sales - Cost of goods sold

Net sales = Sales - Sales discount - Sales return and allowances

= 210,000 - 6,000 - 11,000

= $193,000

Cost of goods sold = $125,000

Gross margin

= 193,000 - 125,000

= $68,000

Therefore the correct answer is $68,000.

Others expense like interest expense and Administrative expense are indirect expenses which are used to calculate net income and will not be considered in calculating gross margin.

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