In 2019, Cumquat Co. incurred cost of goods sold of $74,763 million on gross sales revenue of $87,592 million. Sales returns and allowances were $10,473 million. What was Cumquat's profit margin for 2019? (Assume no other expenses.)

Question

Quizplus · Accepted Answer

Net Sales = Gross sales revenue - Sales returns and allowances
X = $87,592 - $10,473
X = $77,119 = Net Sales
Net income = Net Sales - Cost of goods sold
X = $77,119 - $74,763
X = $2,356 = net income
Profit margin = Return on sales ratio
Return on sales ratio = Net income / Net sales
X = $2,356 / $77,119
X = 0.031 = 3.1%