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Accounting (Text Only)
Determining gross profit
During the current year, merchandise is sold for $4,885,000. The cost of the merchandise so ld is $3,028,700.
a. What is the amount of the gross profit?
b. Compute the gross profit percentage (gross profit divided by sales).
c. Will the income statement necessarily report a net income? Explain.
a.
Gross profit represents the revenue after the deduction of cost of goods sold from the net sales of a business. Its mathematical representation is as below:
To Compute: The gross profit of Company.
Calculate gross profit for Company.
Net sales = $4,885,000
Cost of goods sold = $3,028,700
b.
Gross profit percentage is the financial ratio that shows the relationship between the gross profit and net sales. Gross profit is the difference between the total revenues and cost of goods sold. It is calculated by using the following formula:
To Compute: The gross profit percentage of the company.
c.
To Explain: Whether the income statement necessarily report a net income.
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