During 2013, Rogue Corporation reported sales revenue of $730,000. Inventory at

Question

During 2013, Rogue Corporation reported sales revenue of $730,000. Inventory at both the beginning and end of the year totaled $70,000. The inventory turnover ratio for the year was 8.0.

What amount of gross profit did the company report in its income statement for 2013?

During 2013, Rogue Corporation reported sales revenue of $730,000. Inventory at both the beginning and end of the year totaled $70,000. The inventory turnover ratio for the year was 8.0.

What amount of gross profit did the company report in its income statement for 2013?

Explanation / Answer

Inventory Turnover ratio = Cost of Goods Sold / Average Inventory

Since  Inventory at both the beginning and end of the year totaled $70,000

Average Inventory = $70,000

Inventory Turnover ratio = Cost of Goods Sold / 70,000

Cost of Goods Sold = 8 *70,000 = $560,000

Sales Revenue = $730,000

Gross Profit = Sales Revenue - Cost of Goods Sold

Gross Profit = 730,000 - 560,000

Gross Profit = $170,000

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