The following information is available for Fordham Corp.for its most recent year:

The gross margin is 40 percent of net sales.What is the cost of goods available for sale?

Question

The following information is available for Fordham Corp.for its most recent year:

The gross margin is 40 percent of net sales.What is the cost of goods available for sale?

Quizplus · Accepted Answer

Since the gross margin is 40% of net sales, it means that cost of goods sold is 60% of net sales. Therefore, we can calculate the cost of goods available for sale by dividing the total net sales by 0.6:

Cost of goods available for sale = Net sales / 0.6 
Cost of goods available for sale = $4,000,000 / 0.6 
Cost of goods available for sale = $6,666,666.67

Therefore, the best choice is C, $2,400,000, as it is the closest possible answer to $6,666,666.67.

The Following Information Is Available for Fordham Corp