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E5-13 Presented below esented below is financial information for two different companies. May Company Reed Company Sales reve
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May company Reed company
1.Sales revenue 90,000 107,000
2.Sales returns 3,00 5,000
3.Net sales 87,000 102,000
4.Cost of goods sold 56,000 60,500
5.Gross profit 31,000 41,500
6.Operating expenses 15,000 26,500
7.Net income 16,000 15,000

Gross profit rate = Gross Profit/Net sales

May company = 31,000/87,000 =35.6%

Reed company = 41,500/102,000 =40.7%

Formulas used :-

Net sales = Sales - Sales returns

Gross profit = Net sales - Cost of Goods Sold

Net income = Gross Profit - Operating expenses

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