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22 June, 20:06

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 $1920000 and 65.75%. $1920000 and 34.25%. $1370000 and 65.75%. $1550000 and 34.25%.

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  1. 22 June, 20:24
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    B. $1,920,000 and 34.25%.

    Explanation:

    Novak Company

    Income Statement (Partial)

    Sales Revenue $2,920,000

    Less: Cost of goods sold

    Beginning inventory $550,000

    Add: Purchase $2,340,000

    Goods available for sale $2,890,000

    Less: Ending Inventory ($970,000)

    Cost of goods sold $1,920,000

    Gross profit $1,000,000

    We know, gross profit margin = (Gross profit : Sales Revenue) * 100

    gross profit margin = ($1,000,000 : $2,920,000) * 100

    gross profit margin = 0.3425 * 100

    Therefore, gross margin = 34.25%

    So, option B is the answer.
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