Question

Use the following financial information is presented below

Operating expenses $40,000
Sales revenue $150,000
Sales returns and allowances $15,000
Sales discounts $10,000
Cost of goods sold $80,000
The gross profit rate would be:

Answer 1

The gross profit rate is calculated by subtracting sales returns, allowances, and sales discounts from the sales revenue to get net sales, then subtracting the cost of goods sold from net sales, and dividing the gross profit by net sales. For the given data, the gross profit rate is 36%.

Step-by-step explanation:

To calculate the gross profit rate, you must subtract the cost of goods sold (COGS), sales returns, allowances, and sales discounts from the sales revenue. First, calculate the net sales by subtracting the sales returns and allowances of $15,000 and the sales discounts of $10,000 from the sales revenue of $150,000, which results in net sales of $125,000. Then subtract the cost of goods sold ($80,000) from the net sales to find the gross profit. The formula is as follows:

Net Sales = Sales Revenue - Sales Returns and Allowances - Sales Discounts

Gross Profit = Net Sales - Cost of Goods Sold

Gross Profit Rate = Gross Profit / Net Sales

So, the calculations are:

Net Sales = $150,000 - $15,000 - $10,000 = $125,000

Gross Profit = $125,000 - $80,000 = $45,000

Gross Profit Rate = $45,000 / $125,000 = 0.36 or 36%