Barger-Volvov Company had the following information at December 31, 2020: $\begin{array}{cc}
\text { Finished goods inventory, January 1,2020 } &\$15,000\
\text { Finished goods inventory, December 31, 2020 } &\$21,000\
\end{array}$
If the cost of goods manufactured during the year amounted to $332,500 and annual sales were $499,000, how much is the amount of gross profit for the year?

Question

Barger-Volvov Company had the following information at December 31, 2020: $\begin{array}{cc}
  \text { Finished goods inventory, January 1,2020 } &\$15,000\
 \text { Finished goods inventory, December 31, 2020 } &\$21,000\
\end{array}$
 If the cost of goods manufactured during the year amounted to $332,500 and annual sales were $499,000, how much is the amount of gross profit for the year?

Quizplus · Accepted Answer

The gross profit is calculated as sales minus the cost of goods sold (COGS). COGS is calculated as beginning finished goods inventory plus cost of goods manufactured minus ending finished goods inventory. Thus, COGS = $15,000 + $332,500 - $21,000 = $326,500. Gross profit = Sales - COGS = $499,000 - $326,500 = $172,500.

Barger-Volvov Company Had the Following Information at December 31, 2020