Swank Clothiers had sales of $458,000 and cost of goods sold of
$321,000.
a. What is the gross profit margin (ratio of gross
profit to sales)? (Do not round intermediate calculations.
Input your answer as a percent rounded to 2 decimal places.)
b. If the average firm in the clothing industry
had a gross profit of 40 percent, how is the firm doing?
Answer to Part a.
Gross profit = Sales - Cost of Goods Sold = $ 458,000 - $ 321,000 = $ 137,000
Gross Profit Margin = Gross Profit / Sales
Gross Profit Margin = $137000 / $ 458000
Gross Profit Margin = 29.91%
Answer to Part b.
Swank Clothiers has a Gross Profit Margin is 29.91%, If the average firm in the clothing industry had a gross profit of 40 per cent. Then Swank Clothiers is not doing goods as its profit margin is less than Industry Average is not good as compared with Industry.
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