Q27E - Horngren'S Financial And Managerial Accounting

Question

Crazy Cookies earned net sales revenue of \(66,000,000 in 2018. The cost of goods sold was \)39,600,000, and net income reached $7,000,000, the company’s highest ever. Compute the company’s gross profit percentage for 2018.

Step-by-Step Solution

Answer

The gross profit percentage of the company is 40%

Step 1: Meaning of Gross Profit

Gross profit denotes the amount of profit left with the company after making the payments of all the costs associated with the business's sales process. It is computed after deducting the cost of goods sold from the net sales revenues.

Step 2: Computation of gross profit percentage

$$\begin{gathered} \text{Gross profit percentage}=\frac{\text{Net sales revenue}-\text{Cost of goods sold}}{\text{Net sales revenue}}\times 100 \\ =\frac{\$66,000,000-\$39,600,000}{\$66,000,000}\times 100 \\ =\frac{\$26,400,000}{\$66,000,000}\times 100 \\ =40\% \end{gathered}$$