Question

Baskin-Robbins is one of the world’s largest specialty ice cream shops. The company offers dozens of different flavors, from Very Berry Strawberry to lowfat Espresso ’n Cream. Assume that a local Baskin-Robbins in Raleigh, North Carolina, has the following amounts for the month of July 2021.  

Salaries expense $ 12,300	Sales revenue $ 62,800
Inventory (July 1, 2021) 1,600	Interest income 1,900
. Sales returns 1,000	Cost of goods sold 28,000
Utilities expense 2,900	Rent expense 5,300
Income tax expense 4,600	Interest expense 300
	Inventory (July 31, 2021) 1,000

1. Prepare a multiple-step income statement for the month ended July 31, 2021.

2-a. Calculate the inventory turnover ratio for the month of July

2-b. Would you expect this ratio to be higher or lower in December 2021?

3. Calculate the gross profit ratio for the month of July.

Answer 1

Multiple step income statement of Raleigh Baskin robins
for the month July 2021
Particulars	Amt	Amt
Net Sales ( 62800-1000)		61800
Less:- Cost of goods sold		28000
Gross profit		33800
Operating expenses
Salaries	12300
Utility expenses	4600
Rental expenses	5300
Total operating expenses		22200
Net operating income		11600
(Gross profit-Operating expenses)
Other revenue
Interest income		1900
Other expenses
Interest expenses		300
Net other income		1600
Income before tax		10000
(Net operating income + Net other income)
Less:- Tax expenses		4600
Net Profit after tax		5400
Inventory turnover ratio for the month of July
inventory turnover ratio represents how many times the inventory is being sold or being consumed over a period
Formulae
Cost of goods sold / (Average inventory)
Average inventory
Opening stock	1600
Closing stock	1000
Average	1300
therefore inventory turnover ratio for month of July
33800/1300	26.00
B- Ratio will be lower or higher for the month of Dec
It is based on future budgeted Sales and cost related to those sales can't decide based on given information
Gross profit ratio for the month of July
Gross profit / Net Sales
33800/61800	54.69%