Question

Presented below is information related to Oriole Corporation for the current year. Beginning inventory $ 596,100 Purchases 1,505,300 Total goods available for sale $2,101,400 Sales revenue 2,500,000 Compute the ending inventory, assuming that (a) gross profit is 46% of sales, (b) gross profit is 60% of cost, (c) gross profit is 32% of sales, and (d) gross profit is 25% of cost.

Answer 1

a) When gross profit is 46% of sales :

Gross profit = Sales * Gross profit % on sales = $2,500,000 * 46% = $1,150,000

Cost of goods sold = Sales - Gross profit = $2,500,000 - $1,150,000 = $1,350,000

Ending inventory = Total goods available for sale - Cost of goods sold = $2,101,400 - $1,350,000 = $751,400

b) When gross profit is 60% of cost :

Gross profit = Sales * Gross profit % on cost / ( 100% + Gross profit % on cost ) = $2,500,000 * 60% / ( 100% + 60% ) = $937,500

Cost of goods sold = Sales - Gross profit = $2,500,000 - $937,500 = $1,562,500

Ending inventory = Total goods available for sale - Cost of goods sold = $2,101,400 - $1,562,500 = $538,900

c) When gross profit is 32% of sales :

Gross profit = Sales * Gross profit rate on sales = $2,500,000 * 32% = $800,000

Cost of goods sold = Sales - Gross profit = $2,500,000 - $800,000 = $1,700,000

Ending inventory = Total cost of goods available for sale - Cost of goods sold = $2,101,400 - $1,700,000 = $401,400

d) When Gross profit is 25% of cost :

Gross profit = Sales * Gross profit % on cost / ( 100% + Gross profit % on cost ) = $2,500,000 * 25% / ( 100% + 25% ) = $500,000

Cost of goods sold = Sales - Gross profit = $2,500,000 - $500,000 = $2,000,000

Ending inventory = Total cost of goods available for sale - Cost of goods sold = $2,101,400 - $2,000,000 = $101,400