During its first month of operations, Purrfect Pets purchased 5,200 bags of dog

Question

During its first month of operations, Purrfect Pets purchased 5,200 bags of dog food at a cost of $6 a bag and sold all 5,200 bags of dog food on account with payment terms of $ 2/10, net 30 for $10 each. A total of 2,200 of these bags were sold to customers who paid within the discount period, the other customers paid after the discount period had ended. Sales allowances totaling $200 were granted to customers whose dogs did not like the dog food. Required a. Calculate the gross profit for the month. Gross Profit b. Calculate the gross profit percentage for the month. (Round your answer to one decimal place (i.e. 0.1234 should be entered as 12.3)) Gross Profit Percentage

Explanation / Answer

Number of units purchased = 5,200
Cost per unit = $6

Number of units sold = 5,200
Selling Price per unit = $10

Sales Revenue = Number of units sold * Selling Price per unit
Sales Revenue = 5,200 * $10
Sales Revenue = $52,000

Cost of Goods Sold = Number of units purchased * Cost per unit
Cost of Goods Sold = 5,200 * $6
Cost of Goods Sold = $31,200

Sales Discount = 2,200 * $10 * 2%
Sales Discount = $440

Sales Allowances = $200

Net Sales = Sales Revenue - Sales Discount - Sales Allowances
Net Sales = $52,000 - $440 - $200
Net Sales = $51,360

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $51,360 - $31,200
Gross Profit = $20,160

Gross Profit Percentage = Gross Profit / Net Sales
Gross Profit Percentage = $20,160 / $51,360
Gross Profit Percentage = 39.3%

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