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Lemon Lime Company made sales of $24,500 million during 2014. Cost of goods sold for the year totaled $9,800 million. At the end of 2013, Lemon Limes inventory stood at $1,200 million, and Lemon Lime ended 2014 with inventory of $1,600 million. Compute Lemon Limes gross profit percentage and rate of inventory turnover for 2014

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Answer #1

Calculation of Gross Profit Percentage =   

  1. Cost of goods sold= $9,800
  2. Revenue earned during 2014= $24,500
  3. Calculate gross profit by subtracting costs from revenue : $24,500 - $9800 = $14700
  4. Divide gross profit by revenue : $14,700 / $24,500 = 0.6   
  5. express it as percentage : 0.6 *100 = 60%

Therefore, gross profit percentage is 60%.

Calculation of rate of inventory turnover for 2014=

  1. Cost of goods sold = $9,800   
  2. Add your beginning inventory to your ending inventory = $$1,200 + $1,600 = $2,800
  3. Divide the sum of the beginning and ending inventory in half to calculate the average inventory = $2,800 / 2 = $1,400
  4. Calculate the inventory turnover by dividing the cost of goods sold by the average inventory. ( Inventory turnover = Cost of goods sold / Average inventory ) = $9,800 / $1,400 = $7

Therefore, Inventory turnover for 2014 is $7.

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