Question

During its first month of operations, Purrfect Pets purchased 5,100 bags of dog food at a cost of $7 a bag and sold all 5,100 bags of dog food on account with payment terms of 1/10, n/30 for $11 each. A total of 2,100 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended. Sales allowances totaling $220 were granted to customers whose dogs did not like the dog food. Required: Calculate the gross profit for the month. Calculate the gross profit percentage for the month.

Answer 1

Purrfect Pets

The gross profit for the month is:

= $20,180.

The gross profit percentage for the month is:

= 36.11%.

Step-by-step explanation:

a) Data and Calculations:

Quantity of dog food purchased = 5,100 bags

Cost per bag = $7

Quantity of dog food sold = 5,100 bags

Sales price per bag = $11

Sales revenue $56,100 ($5,100 * $11)

Less Sales allowances 220

Net Sales $55,880

Cost of goods (dog food) sold 35,700 (5,100 *$7)

Gross profit $20,180

Discounts (2,100 * $11 * 1%) 231

Net operating income $19,949

Gross profit percentage = Gross profit/Net Sales * 100

= $20,180/$55,880 * 100

= 36.11%