Presented below is financial information for two different companies. Determine the missing amounts.
May Company Reed Company
Sales revenue $90,000 $ (d)
Sales returns (a) 5,000
Net sales 87,000 102,000
Cost of goods sold 56,000 (e)
Gross profit (b) 41,500
Operating expenses 15,000 (f)
Net income (c) 15,000
Determine the gross profit rates. (Round answer to 1 decimal place, e. g. 25.2%.)
May Company Reed Company
The gross profit rate % %

See explanation

Explanation:

The missing amounts are gotten below:

Sales revenue:

May company = 90,000

Reed company = 107,000

Sales returns

May company = 300

Reed company = 5,000

Net sales

May company = 87,000

Reed company = 102,000

Cost of goods sold

May company = 56,000

Reed company = 60,500

Gross profit

May company = 31,000

Reed company = 41,500

Operating expenses

May company = 15,000

Reed company = 26,500

Net income

May company = 16,000

Reed company = 15,000

Then, the gross profit rate would be calculated as:

= Gross Profit/Net sales

For May company, this will be:

= 31,000/87,000

= 0.36

= 35.6%

For Reed company, this will be:

= 41,500/102,000

= 0.47

= 40.7%

Note that some of the formula used to solve the above question include the net sales which is the difference between the sales and sales return.

Gross profit is the difference between the net sales and the cost of the goods sold

Net income is the difference between the gross profit and the operating expenses

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