Exhibit 5-2
The following is an income statement from the financial records of Peace, Love and Joy Company for the year ended December 31, 2015:

-Refer to Exhibit 5-2. Compute the gross profit margin for Peace, Love, and Joy Company.
A) 50%
B) 137%
C) 72.5%
D) 82.3%

Question

Exhibit 5-2 
The following is an income statement from the financial records of Peace, Love and Joy Company for the year ended December 31, 2015: 
 
-Refer to Exhibit 5-2. Compute the gross profit margin for Peace, Love, and Joy Company.
A) 50% 
B) 137% 
C) 72.5% 
D) 82.3%

Quizplus · Accepted Answer

To find the gross profit margin, we need to divide the gross profit by the total revenue and then multiply by 100. 
Gross profit = Total revenue - Cost of goods sold 
Gross profit = $500,000 - $137,500 
Gross profit = $362,500 
Gross profit margin = (Gross profit / Total revenue) x 100% 
Gross profit margin = ($362,500 / $500,000) x 100% 
Gross profit margin = 72.5% 
Therefore, the gross profit margin for Peace, Love, and Joy Company is 72.5%.

Exhibit 5-2 The Following Is an Income Statement from the Financial Records