Question

Refer to the following mentioned data.

	(In millions)
	2014			2013			2012
Net revenues	$	8,268		$	8,052		$	7,175
Cost of products sold		5,370			5,140			4,365
Gross margin	$	2,898		$	2,912		$	2,810
(a) Calculate the gross profit ratio for each of the past three years. (Round your answers to 1 decimal place.) (b) Assume that Campbell’s net sales for the first four months of 2015 totaled $2.7 billion. Calculate an estimated cost of goods sold and gross profit for the four months, using the gross profit ratio for 2014.

Answer 1

Requirement a

Calculation of Gross margin ratio
($ in million)
	2014	2013	2012
Net revenues	$ 8,268.00	$ 8,052.00	$ 7,175.00
Cost of products sold	$ 5,370.00	$ 5,140.00	$ 4,365.00
Gross margin	$ 2,898.00	$ 2,912.00	$ 2,810.00
Gross margin Ratio	35.1%	36.2%	39.2%

Gross profit margin =Gross margin/Sales revenue.

Requirement b

For the first four month of 2015
($ in billion)
A	Sales	$          2.70
B	Gross margin Ratio	35.1
C=A x B	Gross margin	$          0.95
D=A-C	Cost of good sold	$          1.75

We know that sales minus COGs is Gross profit. When we have calculated gross profit using Gross margin ratio of 2014 , we could easily calculate COGS bt deducting gross profit from sales.

Alternatively COGS will be 64.9% of sales (100-31.1)

COGS =sales x 64.9%

COGS=$1.75 billion