In the Augie Company, sales were $750,000, sales returns and allowances were $30,000, and cost of goods sold was $450,000. The gross profit rate was

Question

Quizplus · Accepted Answer

Gross Profit = Sales - Cost of Goods Sold
Gross Profit = $750,000 - $450,000 = $300,000

Gross Profit Rate = (Gross Profit / Sales) x 100%
Gross Profit Rate = ($300,000 / $750,000) x 100%
Gross Profit Rate = 40%

However, the question asks for the gross profit rate after including sales returns and allowances. To calculate this, we need to subtract the sales returns and allowances from sales first.

$750,000 - $30,000 = $720,000

Gross Profit Rate = (Gross Profit / Sales after returns and allowances) x 100%
Gross Profit Rate = ($300,000 / $720,000) x 100%
Gross Profit Rate = 41.7%

Therefore, the best choice is B.

In the Augie Company, Sales Were $750,000, Sales Returns and Allowances