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?

a.
This transaction will decrease Korey’s gross monthly profit by $625.
b.
This transaction will increase Korey’s gross monthly profit by $625.
c.
This transaction will decrease Korey’s gross monthly profit by $1,760.
d.
This transaction will increase Korey’s gross monthly profit by $1,760.

Answer 1

Option A is correct.

Explanation:

This transaction will decrease Korey's gross monthly profit by $625.

Korey wants to build up his in-store browsing selection, and purchases an additional assortment of comic books that costs him $625 but this purchase will not reach until next month. This is why Korey will not get a profit of $625

Answer 2

The answer to the question above is "a. This transaction will decrease Korey’s gross monthly profit by $625" based on Korey's financial situation above. Korey has purchased the $625 assortment of comic however he will not receive his new additional comics until last month. This transaction will increase his cost of good sold and decrease his gross profit.