Question

A consumer products company reported a 5.4 percent increase in sales from Year 1 to Year 2. Sales in Year 1 were $30,400. In Year 2, the company reported cost of goods sold in the amount of $10,407. What was the gross profit percentage in Year 2? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).)

Answer 1

Answer:

The gross profit percentage in Year 2 is:

67.52%

Explanation:

a) Data and Calculations:

                                      Year 1       Year 2

Sales                          $30,400    $32,042

Cost of goods sold                         10,407

Gross profit                                  $21,635

b) Sales increased by 5.4% from year 1 to year 2 = $32,042 ($30,400 * 1.054)

c) Gross profit percentage for Year 2 = Gross profit/Sales * 100

= $21,635/$32,042 * 100

= 0.6752

= 67.52%

d) The gross profit percentage is also known as the gross margin percentage.  It is expressed as the gross profit divided by sales, and then multiplied by 100.  This ratio shows the percentage of sales value that is not consumed as part of the cost of goods sold.  The gross profit is the first profit point.  It is from this profit that period costs are deducted before arriving at the net income.