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31 December, 17:33

During its first month of operations, Purrfect Pets purchased 5,400 bags of dog food at a cost of $2 a bag and sold all 5,400 bags of dog food on account with payment terms of 3/10, n/30 for $11 each. A total of 2,600 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended. Sales allowances totaling $220 were granted to customers whose dogs did not like the dog food. Required: Calculate the gross profit for the month. Calculate the gross profit percentage for the month.

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  1. 31 December, 18:36
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    the gross profit for the month is $47,522

    the gross profit percentage for the month is 81.48%

    Explanation:

    gross profit calculation for the month

    Sales (5,400 * $11) 59,400

    Less Discount Allowed (2,600*$11*3%) (858)

    Less Sales Allowances $220 (220)

    Net Sales 58,322

    Less Cost of Goods Sold

    Opening Stock 0

    Add Purchases (5,400 * $2) 10,800

    Less Closing Stock 0 (10,800)

    Gross Profit 47,522

    gross profit percentage for the month

    gross profit percentage = gross profit / sales * 100

    = 47,522 / 58,322 * 100

    = 81.48%
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