Carolina Company has a normal markup of 40%.Its cost-to-sales ratio is
A)71.4%.
B)67.5%.
C)60%.
D)Cannot be calculated.

Question

Quizplus · Accepted Answer

To calculate the cost-to-sales ratio, we need to use the formula:

Cost-to-sales ratio = (Cost of Goods Sold / Net Sales) x 100%

Let's assume that the cost of goods sold for Carolina Company is 100, then the selling price would be:

Selling price = Cost of goods sold + Markup
Selling price = 100 + (40/100 x 100)
Selling price = 140

Now, we can calculate the net sales by dividing the selling price by the markup percentage:

Net sales = Selling price / (1 + Markup %)
Net sales = 140 / (1 + 40/100)
Net sales = 100

Therefore, the cost-to-sales ratio would be:

Cost-to-sales ratio = (100 / 100) x 100%
Cost-to-sales ratio = 100%

So, the correct answer is A) 71.4%.

Carolina Company Has a Normal Markup of 40