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At the beginning of the year, Novak had an inventory of $550000. During the year, the company purchased goods costing $2340000. If Novak reported ending inventory of $970000 and sales of $2920000, their cost of goods sold and gross profit rate would be

Answer :

TomShelby

Answer:

COGS 1,920,000

Gross Profit rate 34.24%

Explanation:

We solve for COGS using the inventory identity:

[tex]Beginning \: Inventory+ purchase = ending \: Inventory + COGS[/tex]

The left side are the input of inventory and the right side, the destination afterall, a units can be either on the ending inventory or sold.

We clear for COGS

COGS = beginning + purchase - ending

then plug the values into the formula and solve.

COGS = 550,000 + 2,340,000 - 970,000 = 1,920,000

The sales value is not in the formula so, we ignore this data.

Gross profit rate:

(Sales - COGS)/Sales

(2,920,000 - 1,920,000)/2,920,000 = 1,000,000 / 2,920,000 = 0.3424 = 34.24%

From every dollar of sale, the company obtain 34.24% of gross profit

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