Question

Precious, Inc. is a merchandiser of a single line of golden rings. At the beginning of the​ day, the shop had 10 rings in its inventory. During the​ day, 3 new rings were delivered to the shop. By close of​ business, only 7 rings remained in inventory.

The purchase price of each ring from the supplier is ​$254. In​ addition, the company pays​ $5 for shipping and delivery insurance on each ring that they purchase.

What is the​ company’s Gross Profit for the day if it sells each ring for ​$637​?

​ (assume the unit product cost is consistent between​ periods)

Answer 1

Step 1:- Sales =Opening inventory +purchase- Closing Inventory

Sales = 10 +3-7 = 6 rings

Step 2:- Sales value in $

Rings sold x selling price

6 x $ 637 = $ 3822

Step 3) Cost of goods sold = Purchases + Opening inventory - closing inventory

Closing Inventory = 7 rings x $ 259 ($254 + $5) =$1813

Purchases = 3 Rings x $ 259 = $ 777

Opening inventory = 10 rings x4259= $2590

Cost of goods sold = $777 + $2590- $1813 = $1554

Step 4 ) Gross profit = Sales - Cost of goods sold

=$3822-$1554 = $2268