Question

In accounting, a company's gross profit rate measures how well the company controls cost of goods sold to maximize gross profit. The gross profit rate, PPP, is calculated using the formula P = \dfrac{S - C}{S}P= S S−C ​ P, equals, start fraction, S, minus, C, divided by, S, end fraction, where SSS is the net sales and CCC is the cost of goods sold. Rearrange the formula to solve for the cost of goods sold (C)(C)left parenthesis, C, right parenthesis. C=C=C, equals What is the cost of goods sold if the net sales is \$1{,}200{,}000$1,200,000dollar sign, 1, comma, 200, comma, 000 and the gross profit ratio is 0.20.20, point, 2? Round your answer, if necessary, to the nearest dollar. C=C=C, equals dollars

Answer 1

Answer:

$960,000

Step-by-step explanation:

The gross profit rate of the company is expressed as $P = \dfrac{S - C}{S}$ where C is the cost of goods sold and S is the net sales. If the net sales S = $1,200,000, and gross profit ratio is 0.20, the cost of goods sold will be expressed as shown;

Making C the subject of the formula from the expression given.

$P = \dfrac{S - C}{S}\\\\cross \ multiply\\\\SP = S-C\\\-C = SP-S\\\\C = S -SP$

Substituting P = 0.20 and S = $1,200,000 into the resulting equation, we will have;

$C = 1,2000,000 - 0.2( 1,2000,000)\\C = 1,2000,000- 240,000\\ C = 960,000$

Hence the cost of goods sold is $960,000