During its first month of operations, Purrfect Pets purchased 5,300 bags of dog

Question

During its first month of operations, Purrfect Pets purchased 5,300 bags of dog food at a cost of $4 a bag and sold all 5,300 bags of dog food on account with payment terms of $ 1/10, net 30 for $10 each. A total of 2,000 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.

a. Calculate the gross profit for the month.

b. Calculate the gross profit percentage for the month.

During its first month of operations, Purrfect Pets purchased 5,300 bags of dog food at a cost of $4 a bag and sold all 5,300 bags of dog food on account with payment terms of $ 1/10, net 30 for $10 each. A total of 2,000 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.

a. Calculate the gross profit for the month.

b. Calculate the gross profit percentage for the month.

Explanation / Answer

Number of bags purchased 5300 cost of each bag 4 Total cost of purchase 21200 Number of bags sold 5300 Selling price per bag 10 Sales Revenue 53000 Number of bags sold within discount period 2000 Selling price per bag 10 Sales Revenue 20000 Discount % 1% Discount 200 Sales allowance 200 a) Gross Profot for the month Sales Revenue 53000 Less Sales Discount 200 Sales allowance 200 400 Net Sales 52600 Less Cost of purchase 21200 Gross Profit for the month 31400 b) Gross profit % Gross Profit for the month 31400 Net Sales 53000 Gross profit % ( gross profit / net sales) 59.25%

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