Net sales for the year were $1,050,000 and cost of goods sold was $735,000 for the company’s existing products. A new product is presently under development and will have an expected selling price of not more than $68 per unit in order to remain competitive with similar products in the marketplace. Required: a. Calculate gross profit and the gross profit ratio for the year.

The answer is:

Gross profit is $315,000

Gross profit ratio is 30 percent

Explanation:

Gross profit equals net sales minus cost of sales

Net sales - $1,050,000

Cost of sales - ($735,000)

Gross profit -. $315,000

Gross profit ratio is:

(Gross profit / net sales) x 100 percent

($315,000 / $1,050,000) x 100 percent

0.3 x 100 percent

30 percent.

So we have:

Gross profit is $315,000

Gross profit ratio is 30 percent

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