Question

Barger Company had the following information at December 31:

Finished goods inventory, January 1 $ 90,000
Finished goods inventory, December 31 126,000
If the cost of goods manufactured during the year amounted to $1,895,000 and annual sales were $2,994,000, how much is the amount of gross profit for the year?

Answer 1

To calculate the gross profit, subtract the COGS from the sales revenue. The COGS is calculated by subtracting the cost of goods manufactured from the sum of the beginning finished goods inventory and COGM, and then subtracting the ending finished goods inventory. By applying these calculations, the gross profit for the year is $1,135,000.

Step-by-step explanation:

In order to calculate the gross profit, we need to subtract the cost of goods sold (COGS) from the sales revenue. COGS is calculated by subtracting the cost of goods manufactured (COGM) from the finished goods inventory at the beginning of the year and adding the finished goods inventory at the end of the year.

COGS = (Beginning Finished Goods Inventory + COGM) - Ending Finished Goods Inventory

Given that the beginning finished goods inventory is $90,000, the ending finished goods inventory is $126,000, and the COGM is $1,895,000, we can calculate the COGS:

COGS = ($90,000 + $1,895,000) - $126,000 = $1,859,000

The gross profit is calculated by subtracting the COGS from the sales revenue:

Gross Profit = Sales Revenue - COGS

Gross Profit = $2,994,000 - $1,859,000 = $1,135,000