Question

Coleman, Inc. provides the following data from its income statement for 2017: Net Sales $520,000, Cost of Goods Sold ($170,000), Gross Profit $350,000. Calculate the gross profit percentage. (Round your answer to two decimal places.)

Answer 1

The gross profit percentage for Coleman, Inc. is calculated using the formula: (Gross Profit ÷ Net Sales) × 100, which gives 67.31% after rounding to two decimal places. Similarly, the accounting profit in the self-check question for a firm with total sales of $1,000,000 and total expenses of $950,000 is found to be $50,000.

Step-by-step explanation:

To calculate the gross profit percentage, we will use the following formula: Gross Profit Percentage = (Gross Profit ÷ Net Sales) × 100. For Coleman, Inc., the numbers provided are a Net Sales of $520,000 and a Gross Profit of $350,000. Using the formula, we get the following:

Gross Profit Percentage = ($350,000 ÷ $520,000) × 100

When we do the math, the calculation is: Gross Profit Percentage = 0.6731 × 100

After rounding to two decimal places, the Gross Profit Percentage for Coleman, Inc. in 2017 is 67.31%.

Using the same methodology, the Self-Check Question provided can be answered. With total sales revenue of $1,000,000 and total expenses (labor, capital, and materials) of $950,000 ($600,000 on labor, $150,000 on capital, and $200,000 on materials), the accounting profit is:

Accounting Profit = Total Revenues - Explicit Costs = $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.

Therefore, the firm's accounting profit last year was $50,000.