Question

Gannon Company had the following information at December 31:

Finished goods inventory, January 1 $50,000
Finished goods inventory, December 31 $150,000

If the cost of goods manufactured during the year amounted to $2,100,000 and annual sales were $2,750,000, the amount of gross profit for the year is ___.

Answer 1

$750,000

Step-by-step explanation:

In this example, the amount of gross profit for the year is $750,000. Gross profit (or gross margin) refers to the total revenue of a business minus the cost of goods sold (COGS). It is important to know a company's gross profit, as this reflects the profit before operating expenses, interest payments and taxes. In this example:

$2,750,000 - $2,100,000 = $650,000

$650,000 - $50,000 = $600,000

$600,000 + $150,000 = $750,000