Question

Ziehart Pharmaceuticals reported Net Sales of $195,000 and Cost of Goods Sold of $66,600. Candy Electronics Corporation reported Net Sales of $53,000 and Cost of Goods Sold of $39,800 Required: 1. Calculate the gross profit percentage for both companies. (Round your answers to 1 decimal place.) 2. Which company has a greater proportion of its sales available to cover expenses other than cost of goods sold?

Answer 1

Ziehart Pharmaceuticals has a gross profit percentage of 65.8%, whereas Candy Electronics Corporation has a gross profit percentage of 24.9%. Ziehart Pharmaceuticals has a higher proportion of sales to cover other expenses beyond the cost of goods sold.

Step-by-step explanation:

To calculate the gross profit percentage for both Ziehart Pharmaceuticals and Candy Electronics Corporation, we can use the formula:

Gross Profit Percentage = (Net Sales - Cost of Goods Sold) / Net Sales × 100%

For Ziehart Pharmaceuticals:

Gross Profit = $195,000 - $66,600 = $128,400

Gross Profit Percentage for Ziehart Pharmaceuticals = ($128,400 / $195,000) × 100% = 65.8%

For Candy Electronics Corporation:

Gross Profit = $53,000 - $39,800 = $13,200

Gross Profit Percentage for Candy Electronics Corporation = ($13,200 / $53,000) × 100% = 24.9%

Ziehart Pharmaceuticals has a greater proportion of its sales available to cover expenses other than cost of goods sold than Candy Electronics Corporation because its gross profit percentage is higher.