Question

Alberto and Sons, Inc., a retailer of antique figurines, engages in the following transactions during October of the current year

Oct. 1 - purchases 100 hummels at $50 each
Oct. 5 - sells 50 of the hummels at $80 each

compute Alberto and Son's gross profit for October
A) $1500
B) $2500
C) $2000
D) $3000"

Answer 1

Alberto and Sons, Inc.'s gross profit for October is calculated by subtracting the cost of goods sold for 50 hummels (50 x $50 = $2500) from the sales revenue of those hummels (50 x $80 = $4000), resulting in a gross profit of $1500.

Step-by-step explanation:

To compute Alberto and Sons, Inc.'s gross profit for October, we need to calculate the difference between the sales revenue and the cost of goods sold (COGS). On October 1st, they purchased 100 hummels at $50 each, resulting in a total COGS of 100 x $50 = $5000. On October 5th, they sold 50 of those hummels at $80 each, so their sales revenue is 50 x $80 = $4000.

The formula to calculate gross profit is: Gross Profit = Sales Revenue - Cost of Goods Sold.

However, since they only sold 50 hummels, we need to adjust the COGS to account for the 50 that were actually sold: 50 x $50 = $2500. Now, we apply the formula: Gross Profit = $4000 (Sales Revenue) - $2500 (Adjusted COGS) = $1500.

Therefore, the correct answer for Alberto and Sons, Inc.'s gross profit for October is Option A) $1500.