Question

If a company has net sales of 700,000 and cost of goods sold for 490,000, what is the gross profit percentage?

1) 20%
2) 30%
3) 40%
4) 50%

Answer 1

The gross profit percentage for a company with net sales of $700,000 and a cost of goods sold of $490,000 is calculated by subtracting the cost of goods sold from the net sales to determine the gross profit ($210,000), dividing by net sales and multiplying by 100 to get a percentage, resulting in a 30% gross profit percentage.

Step-by-step explanation:

To calculate the gross profit percentage, we need to determine the gross profit and then divide it by net sales, finally multiplying by 100 to get a percentage. The gross profit is calculated by subtracting the cost of goods sold (COGS) from net sales. In this case, the company's gross profit would be net sales of $700,000 minus the COGS of $490,000, which equals $210,000.

We then divide the gross profit of $210,000 by the net sales of $700,000 to get 0.3. To convert this to a percentage, we multiply by 100, resulting in a gross profit percentage of 30%.

The given answer choice of 50% is incorrect. The correct gross profit percentage is 30%. This is pertinent to understanding the profitability and financial health of a business within the field of accounting.