Question

Spirit Company made sales of $ 38 comma 000 million during 2018. Cost of goods sold for the year totaled $ 17 comma 100 million. At the end of 2017​, Spirit's inventory stood at $ 1 comma 800 ​million, and Spirit ended 2018 with inventory of $ 2 comma 000 million. Compute Spirit's gross profit percentage and rate of inventory turnover for 2018.

Answer 1

Answer:

Inventory TO 9

Gross profit percentage:  55%

Explanation:

Inventory Turnover

$\frac{COGS}{Average Inventory} = Inventory Turnover$

​where:

$Average Inventory=(Beginning Inventory + Ending Inventory)/2$

COGS 17,100

beginning: 1,800

ending:      2,000

$Average Inventory=1,800 + 2,000)/2$

Average Inventory: 1900

$\frac{17,100}{1900} = Inventory Turnover$

Inventory TO 9

Gross profit percentage:

$\frac{sales-COGS}{sales}$

$\frac{38,000-17,100}{38,000}$

Gross profit percentage: 0.55 = 55%