Question

Spirit Company made sales of $ 38 comma 000 million during 2018. Cost of goods sold for the year totaled $ 17 comma 100 million. At the end of 2017​, Spirit's inventory stood at $ 1 comma 800 ​million, and Spirit ended 2018 with inventory of $ 2 comma 000 million. Compute Spirit's gross profit percentage and rate of inventory turnover for 2018.

Answer 1

Inventory TO 9

Gross profit percentage: 55%

Step-by-step explanation:

Inventory Turnover

`(COGS)/(Average Inventory) = $Inventory Turnover`

​where:

`$$Average Inventory=(Beginning Inventory + Ending Inventory)/2`

COGS 17,100

beginning: 1,800

ending: 2,000

`$$Average Inventory=1,800 + 2,000)/2`

Average Inventory: 1900

`(17,100)/(1900) = $Inventory Turnover`

Inventory TO 9

Gross profit percentage:

`(sales-COGS)/(sales)`

`(38,000-17,100)/(38,000)`

Gross profit percentage: 0.55 = 55%