Question

Hazelwood Company had beginning inventory of $54,000. During the period the company purchased $109,800 of merchandise. At the end of the period, Hazelwood’s inventory was $39,600. If the gross profit percentage was 40%, what was Hazelwood’s sales revenue?

Answer 1

Answer:

$207000 is the sales revenue for the year.

Explanation:

The given situation is:

Sales Revenue                              100%

Cost Of Goods sold                      60%

Profit Margin                                  40%

Now we neither have sales revenue figure nor the profit margin figures but we can calculate cost of goods sold from the following formula:

Cost Of Goods Sold = Opening Inventory + Purchases - Closing Inventory

By putting values we have:

Cost Of Goods Sold = $54,000 + $109,800 - $39,600

Cost Of Goods Sold = $124,200

Now cost of goods sold is 60% which means if we want to go at 100% we will divide with the percentage at which we are standing (60%) and multiply with the percentage which we want to calculate (Sales is 100%).

Sales revenue = Cost of goods sold  *    100% / 60%  

Sales revenue = $124200  * 100% / 60%  = $207,000