Heller Company offers an unconditional return policy to its customers. During the current period, the company...

Heller Company offers an unconditional return policy to its customers. During the current period, the company records total sales of $850,000, with a cost of merchandise to Heller of $340,000. Based on past experience, Heller Company expects 4% of sales to be returned. How much gross profit will Heller Company recognize for the current period? Select one:

A. $510,000 B. $816,000 C. $489,600 D. $360,400 E. $850,000

Expert Solution

C. $489,600

Gross Profit Calculation:

Sales		$ 8,50,000
Less Sales return		$ 34,000
Net Sales	(a)		$ 8,16,000
Cost of goods sold		$ 3,40,000
Less merchandise return		$ 13,600
Net Cost of goods sold	(b)		$ 3,26,400

Gross Profit	(a)-(b)		$ 4,89,600

Working:

Sales return	=	Total Sales	*	% of sales to be returned
	=	$ 8,50,000	*	4%
	=	$ 34,000

Merchandise return	=	Cost of goods sold	*	% of sales to be returned
	=	$ 3,40,000	*	4%
	=	$ 13,600

When sales are returned, merchandise cost will also reduced.

ekkarill92 answered 2 years ago

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Heller Company offers an unconditional return policy to its customers. During the current period, the company...

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