I’m so lost in accounting…I think this is a simple question, but I have no idea…
My homework question:
Use the following facts for questions 13 and 14:
The following information is taken from the books of the ABC Company:
Beginning Inventory1,000
Ending Inventory 800
Sales5,000
Purchases 300
13. What is the Gross Profit percentage for ABC?
a. 74%
b. 80%
c. 86%
d. 90%
The answer is D
Gross Profit = 5,000-1,000-300+800 = 4,500
GP % = 4,500 / 5,000
1,000 + 300 is the total inventory available to be sold/used since you had 800 left at the end of the period you used 500 this is your Cost of Goods Sold (COGS). Gross Profit is sales minus Cost of Goods Sold and Gross Profit Percentage is Gross Profit divided by Sales.