Question

Crane Importers reports net income of $49200 and cost of goods sold of $442800. If the company's gross profit rate was 40%, net sales totaled

A. $811800.
B. $1156200.
C. $738000.
D. $1107000.

Answer 1

The net sales are calculated by dividing the cost of goods sold by (1 - gross profit rate). For Crane Importers, the net sales would be $738,000 (Option C) as calculated by dividing $442,800 by 0.60.

Step-by-step explanation:

The student is asking how to calculate net sales given the net income, cost of goods sold (COGS), and the gross profit rate of a company. Crane Importers reported a net income of $49,200 and COGS of $442,800. With a gross profit rate of 40%, we can determine the net sales figure.

Calculation Steps:

1. Calculate the gross profit by subtracting COGS from net sales: Gross Profit = Net Sales - COGS.
2. Express the gross profit rate as a decimal: 40% = 0.40.
3. Rearrange the gross profit formula to solve for net sales: Net Sales = Gross Profit / Gross Profit Rate.
4. Substitute the COGS and gross profit rate into the formula and solve: Net Sales = ($442,800 / (1 - 0.40)).
5. Net Sales = $442,800 / 0.60 = $738,000

Therefore, the correct answer to the question is C. $738,000.