Lew Co. sold 200,000 corrugated boxes for $2 each. Lew's cost was $1 per unit. The sales agreement gave the customer the right to return up to 60% of the boxes within the first 6 months, provided an appropriate reason was given. It was reasonably estimated that 5% of the boxes would be returned. Lew expects an additional $3,000 of costs to recover those boxes. What amount should Lew report as gross profit from this transaction?

Question

Business

Kai Wilkinson

3 March, 18:23

Lew Co. sold 200,000 corrugated boxes for $2 each. Lew's cost was $1 per unit. The sales agreement gave the customer the right to return up to 60% of the boxes within the first 6 months, provided an appropriate reason was given. It was reasonably estimated that 5% of the boxes would be returned. Lew expects an additional $3,000 of costs to recover those boxes. What amount should Lew report as gross profit from this transaction?

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Steve Oneal · Answer 1

It will report gross profit for 177,000 dollars

Explanation:

the rgoss profit is calculate using the net sales figure os the returns should be deducted:

expected return: 5% of 400,000 20,000

additional cost 3,000

sales return provision: 23,000

net sales 400,000 - 23,000 = 377,000

net sales 377,000

COGS 200,000

gross profit 177,000