Question

Net sales for the year were $750,000 and cost of goods sold was $480,000 for the company’s existing products. A new product is presently under development and will have an expected selling price of not more than $62 per unit in order to remain competitive with similar products in the marketplace. Required:. Calculate gross profit and the gross profit ratio for the year.

Answer 1

Answer: Gross profit = $270,000

Gross profit ratio = 36 %

Explanation: We can compute gross profit and gross profit ratio by using the following formula :-

Gross profit = Sales - cost of goods sold

And,

`Gross\:profit\:ratio=(Gross\:profit)/(sales)`

So, putting the values into equation we get :-

Gross profit = $750,000 - $480,000

= $270,000

and,

`Gross\:profit\:ratio=(270,000)/(750,000)`

= 36 %