Question

A company had sales revenue of $800,000 for the year. In addition, the following information is available related to the cost of the units sold: Gross profit $ 340,000 Total purchase cost ? Freight charges 20,000 Purchase returns 80,000 Operating expenses 150,000 Purchase discounts 40,000 What was the total purchase cost of the units sold?

Answer 1

Answer:

$410,000

Explanation:

Given:

Sales = $800,000

Gross profit = $340,000

Cost of goods sold = Sales - Gross profit

                              = 800,000 - 340,000

                              = $460,000

Now, Cost of goods sold = Purchases + operating expenses

Purchases = Purchase cost + freight charges - purchase returns - purchase discount

Substituting the above formula in cost of goods sold equation we get,

Cost of goods sold = (Purchase cost + freight charges - purchase returns - purchase discount) + operating expenses

460,000 = (Purchase cost + 20,000 - 80,000 - 40,000) + 150,000

460,000 = Purchase cost + 50,000

Purchase cost = $410,000

Total purchase cost is $410,000.