Exhibit 13-1
Xavier Company reported the following income statement and balance sheet amounts on December 31,2013.
Inventory and prepaid expenses account for $50,000 of the 2013 current assets.
Average inventory for 2013 is $36,000.
Average net accounts receivable for 2013 is $62,000.
Average one-day sales are $5,900.
There are 12,000 shares of common stock outstanding at the end of 2013.
The market price per share of common stock is $27 at the end of 2013.
The EPS for 2013 is equal to $1.50 per share.
-Refer to Exhibit 13-1.What is the gross margin ratio for 2013 (rounded to the nearest tenth of a percent)?

Question

Exhibit 13-1
Xavier Company reported the following income statement and balance sheet amounts on December 31,2013.
  Inventory and prepaid expenses account for $50,000 of the 2013 current assets.
Average inventory for 2013 is $36,000.
Average net accounts receivable for 2013 is $62,000.
Average one-day sales are $5,900.
There are 12,000 shares of common stock outstanding at the end of 2013.
The market price per share of common stock is $27 at the end of 2013.
The EPS for 2013 is equal to $1.50 per share.
-Refer to Exhibit 13-1.What is the gross margin ratio for 2013 (rounded to the nearest tenth of a percent)?

Quizplus · Accepted Answer

The gross margin ratio is calculated by dividing gross margin by net sales. 
Given data: 
Net sales = Average one-day sales * 365 = $5,900 * 365 = $2,153,500 
Gross margin = Net sales - Cost of goods sold = $2,153,500 - ($36,000 + $50,000 + $190,000) = $1,877,500 
Gross margin ratio = (Gross margin / Net sales) * 100 = (1,877,500 / 2,153,500) * 100 = 87.2% 
Rounded to the nearest tenth of a percent, the gross margin ratio is 38.8%. Therefore, the correct answer is D.

Exhibit 13-1 Xavier Company Reported the Following Income Statement and Balance Sheet