Question

Marigold Corp. had the following information at December 31: Finished goods inventory, January 1 $ 40000 Finished goods inventory, December 31 90000 If the cost of goods manufactured during the year amounted to $2200000 and annual sales were $2750000, the amount of gross profit for the year is

Answer 1

Solution:

Calculation of cost of goods sold:

The formula for calculating the cost of goods sold is

Cost of Goods sold = Cost of Goods manufactured + Opening Finished goods inventory - Closing Finished goods inventory

As per the information given in the question we have

Cost of Goods manufactured = $ 2,200,000 ;

Opening Finished goods inventory at Jan 1 = $ 40,000   ;

Closing Finished goods inventory at Dec 31 = $ 90,000

Applying the above information in the formula for Cost of Goods sold we have

= $ 2,200,000 + $ 40,000 - $ 90,000

= $ 2,150,000

Thus the cost of goods sold = $ 2,150,000

Calculation of Gross Profit for the year:

The formula for calculating the gross profit is = Annual Sales – Cost of goods sold

As per the information available we have

Annual Sales = $ 2,750,000   ;   Cost of goods sold = $ 2,150,000

Applying the above information in the formula for gross profit we have

= $ 2,750,000 - $ 2,150,000

= $ 600,000

Thus the gross profit for the year is = $ 600,000