PCM, Inc., had sales of $38.0 million for fiscal 2010. The company\'s gross prof
ID: 2350487 • Letter: P
Question
PCM, Inc., had sales of $38.0 million for fiscal 2010. The company's gross profit ratio for that year was 21.0%.(a)Calculate the gross profit and cost of goods sold for PCM, Inc., for fiscal 2010. (Round your answers to 2 decimal places. Enter your answers in millions.
Gross profit........... $ in millions
Cost of goods sold......... $ in millions
b) Assume that a new product is developed and that it will cost $457 to manufacture. Calculate the selling price that must be set for this new product if its gross profit ratio is to be the same as the average achieved for all products for fiscal 2010. (Round your answer to 2 decimal places.
Selling price $
Explanation / Answer
a.) Sales = $38,000,000 Gross Profit Ratio = 21% Therefore: Gross Profit = $38,000,000 x 21% = $7,980,000 If Sales - Cost of Goods Sold = Gross Profit, then: $38,000,000 - COGS = $7,980,000 COGS = $30,020,000 b.) Solve for the unknown items: We know what the product will cost to make and we still want to achieve a 21% gross profit ratio. So, we will need to solve this algebraically: Sales - $457 = .21(Gross Profit) If Gross Profit is 21%, then COGS must be 79% (100% - 21%). We can "gross up" the COGS number to find Sales. Like so: $457/.79 = $548.48 (rounded to two decimal places) Hope that helps. Please rate.
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