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Net sales for the year were $750,000 and cost of goods sold was $480,000 for the company’s existing products. A new product is presently under development and will have an expected selling price of not more than $62 per unit in order to remain competitive with similar products in the marketplace. Required:. Calculate gross profit and the gross profit ratio for the year.

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Nyctalus

Answer: Gross profit =  $270,000

Gross profit ratio = 36 %

Explanation: We can compute gross profit and gross profit ratio by using the following formula :-

Gross profit =  Sales - cost of goods sold

And,

[tex]Gross\:profit\:ratio=\frac{Gross\:profit}{sales}[/tex]

So, putting the values into equation we get :-

Gross profit = $750,000 - $480,000

                    = $270,000

and,

[tex]Gross\:profit\:ratio=\frac{270,000}{750,000}[/tex]

                                    = 36 %

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