Question

The following information is available for Sweden Company for its most recent year:

Net sales $1,800,000
Freight-in 45,000
Purchase discounts 25,000
Ending inventory 120,000
The gross margin is 40% of net sales. What is the cost of goods available for sale?
A $1,200,000
B $1,220,000
C $960,000
D $840,000

Answer 1

A $1,200,000

Step-by-step explanation:

The correct answer is D.

the gross margin equals 40% of net sales = 40%* 1,800,000= 720,000

Cost of goods sold will therefore be 60% of net sales;

Cost of goods sold = (60% * 1,800,000) = 1,080,000.

Cost of goods available for sale = cost of goods sold + the cost of ending inventory.

Cost of goods available for sale = 1,080,000+120,000 = $1,200,000