Question

Heller Company offers an unconditional return policy to its customers. During the current period, the company records total sales of $850,000, with a cost of merchandise to Heller of $340,000. Based on past experience, Heller Company expects 4% of sales to be returned. How much gross profit will Heller Company recognize for the current period? Select one: A. $510,000 B. $489,600 C. $816,000 D. $850,000 E. $360,400

Answer 1

Answer:

B. $489,600

Explanation:

The computation of thee gross profit is shown below:

= Net sales - Net cost of goods sold

where,

Net sales = Total sales - sales return

                = $850,000 - $34,000

                = $816,000

Net cost of goods sold = Cost of goods sold - merchandise return

                                      = $340,000 - $13,600

                                      = $326,400

Now put these values to the above formula

So, the value would be equal to

= $816,000 - $326,400

= $489,600