Question

Last month, Korey’s Comics had a gross profit of $2,385 with a monthly revenue of $3,465. Korey expects similar sales this month, but he would like to build up his in-store browsing selection, and purchases an additional assortment of comic books that costs him $625. The new assortment of comics will not arrive until next month. How does this transaction affect Korey’s gross profit for this month?

Answer 1

Korey's gross profit will fall by $625. gross profit for the month is $1,760

Step-by-step explanation:

Given:

Gross profit in the previous month = $2,385

Revenue in the previous month = $3,465

Korey expected similar sales this month so his profit for the month should ideally be $2,385. However, he purchased assorted comics worth $625 last this month which he will not be able to sell in the current month as he will receive them only next month.

So, Korey's cost has gone up by $625 but there is no simultaneous increase in revenue. Since gross profit is revenue less cost, Korey's gross profit is $1,760 (2,385 - 625) as revenue is the same. So, Korey's profit fell by $625 this month.