Question

samsung's inventory balance was $35,100 at the beginning of the year and $21,000 at the end. the inventory turnover ratio for the year was 4.4 and the gross profit ratio 30%. what were net sales for the year? (round your answer to the nearest dollar amount.)

Answer 1

We can use the formula for inventory turnover ratio to find the cost of goods sold (COGS):

Inventory turnover ratio = Cost of goods sold / Average inventory

We know the average inventory, which is (beginning inventory + ending inventory) / 2:

Average inventory = (35100 + 21000) / 2 = 28050

And we know the inventory turnover ratio, which is 4.4:

4.4 = COGS / 28050

COGS = 4.4 * 28050 = 123420

We can use the gross profit ratio to find the gross profit:

Gross profit ratio = Gross profit / Net sales

We know the gross profit ratio, which is 30%:

0.3 = Gross profit / Net sales

Gross profit = 0.3 * Net sales

We can use the gross profit and COGS to find the net sales:

Net sales = Gross profit + COGS

Net sales = 0.3 * Net sales + 123420

0.7 * Net sales = 123420

Net sales = 123420 / 0.7

Net sales = 176314.29

Rounding to the nearest dollar, net sales for the year were $176,314.