Question

Oxford packing company reported net sales in november of the current year of $1,000,000. at the beginning of november, the company reported beginning inventory of $368,000. cost of goods purchased during november amounted to $217,500. the company reported ending inventory at the end of november of $226,750. the company's gross profit rate for november of the current year was:

Answer 1

First we must determine the cost of goods sold during November. For this we use beginning inventory ($368,000) + purchases ($217,500) - ending inventory ($226,750). This gives us a total cost of goods sold for November of $358,750. Then, we take the net sales ($1,000,000) minus the cost of goods sold ($358,750) which equals our gross profit of $641,250. Finally we divide gross profit ($641,250) by net sales ($1,000,000) to determine the gross profit rate to be 64.125%