Question

Financial information is presented below:

Operating expenses $ 28,000
Sales returns and allowances 7,000
Sales discounts 3,000
Sales revenue 150,000
Cost of goods sold 91,000

The gross profit rate would be: (Hint: Calculate net sales first)

Answer 1

The gross profit rate is calculated by determining net sales (total sales revenue minus sales returns, allowances, and discounts), subtracting the cost of goods sold from net sales to find gross profit, and then dividing the gross profit by net sales. In the given scenario, the gross profit rate is 35%.

Step-by-step explanation:

To calculate the gross profit rate, you must first determine the net sales by subtracting sales returns and allowances and sales discounts from sales revenue. Starting with sales revenue of $150,000, subtract both the sales returns and allowances ($7,000) and the sales discounts ($3,000), yielding net sales of $140,000. Next, to find the gross profit, subtract the cost of goods sold ($91,000) from the net sales. This results in a gross profit of $49,000. The gross profit rate is then found by dividing the gross profit by the net sales and multiplying by 100 to get a percentage.

The calculation is as follows:
Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $140,000 - $91,000 = $49,000
Gross Profit Rate = (Gross Profit / Net Sales) x 100
Gross Profit Rate = ($49,000 / $140,000) x 100
Gross Profit Rate = 35%

Therefore, the gross profit rate is 35%.