PC Connection is a leading mail order retailer of personal computers. A recent f

Question

PC Connection is a leading mail order retailer of personal computers. A recent financial report issued by the company revealed the following information:


Merchandise inventory (beginning of the year) $ 69 million
Merchandise inventory (end of the year) $ 57 million
Net sales for the year $ 1.2 billion
Gross profit margin 11 %

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a. Compute the company's cost of goods sold for the year. (Enter your answer in dollars not in millions. Omit the "$" sign in your response.)

Cost of goods sold $

b. Approximately how much inventory did PC Connection purchase during the year? (Enter your answer in dollars not in millions. Omit the "$" sign in your response.)

Purchases $

Explanation / Answer

If the Gross Margin rate is 11%, then Costs of Sales = 89% of Net Sales 89% X $1,200,000,000 = $1,068,000,000 Inventory purchased during the year computes as: Ending Inventory $57,000,000 Plus Costs of Sales $1,068,000,000 Less Beginning Inventory $69,000,000 Equals Inventory Purchased during year $1,056,000,000

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