Heller Company offers an unconditional return policy to its customers. During the current period, the company records total sales of $850,000, with a cost of merchandise to Heller of $340,000. Based on past experience, Heller Company expects 4% of sales to be returned.
How much gross profit will Heller Company recognize for the current period?

Question

Quizplus · Accepted Answer

Heller Company expects 4% of sales to be returned, so the expected sales revenue is 96% of $850,000, which is $816,000. The cost of merchandise is $340,000. Gross profit is sales revenue minus cost of merchandise, so $816,000 - $340,000 = $476,000. However, there seems to be a mistake in my calculation or the provided options, as none match the correct calculation of $476,000. Based on the options given, D) $489,600 is the closest, but it does not accurately reflect the correct calculation based on the provided data.

Heller Company Offers an Unconditional Return Policy to Its Customers