Question

In: Accounting

During the current year, merchandise is sold for $8,920,000. The cost of the goods sold is...

During the current year, merchandise is sold for $8,920,000. The cost of the goods sold is $6,065,600. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

  1. What is the amount of the gross profit? Round your answer to the nearest dollar.

    $  

  2. Compute the gross profit percentage (gross profit divided by sales). Round your answer to the nearest whole number.

    %

  3. Will the income statement always report a operating income?

Solutions

Expert Solution

Answer:

b. Gross Profit Percentage = $ 2,854,400

We know that Gross Profit = Net Sales - Cost of Goods Sold

In the given case,

Net Sales = $ 8,920,000

Cost of Goods Sold = $ 6,065,600

Substituting the values in the above equation, we get

Gross Profit = 8920000 - 6065600

= $ 2,854,400

c. Gross Profit Percentage = 32%

We know that,

Gross Profit Percentage = Gross Profit / Sales x 100

= 2854400 / 8920000 x 100

= 32%

d. No, Income Statement does not always give Operating Income. For example, If Operating Expenses are greater than Gross Profit, then the Income Statement does not give an Operating Income as it results in a loss.

You can also consider the equations of Operating Income to understand this :

Operating income = Total Revenue – Direct Costs – Indirect Costs

Or

Operating income = Gross Profit – Operating Expenses – Depreciation – Amortization


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