Determine gross profit of a venture with the following
Financial information: cost of goods sold = $30,000; net profit = $17,000; asset turnover = 1.6; return on assets 32%
A)$85,000
B)$72,000
C)$55,000
D)$38,000

Question

Quizplus · Accepted Answer

First, we can use the formula for return on assets (ROA) to find the total assets of the venture:

ROA = Net Profit / Total Assets

0.32 = $17,000 / Total Assets

Total Assets = $53,125

We can then use the formula for asset turnover to find the revenue of the venture:

Asset Turnover = Revenue / Total Assets

1.6 = Revenue / $53,125

Revenue = $85,000

Finally, we can use the formula for gross profit to find the answer:

Gross Profit = Revenue - Cost of Goods Sold

Gross Profit = $85,000 - $30,000 = $55,000

Therefore, the correct answer is C) $55,000.

Determine Gross Profit of a Venture with the Following