Betty Bailey's Textiles, Inc., uses a perpetual inventory system. In February, Betty Bailey's sold $ 540 comma 000 of merchandise on account with terms 3 /10, n/30. The cost of the merchandise sold was $ 240 comma 000. Using this information, calculate the gross profit from the sale and the gross profit ratio. Assume that the customer does not pay within the discount period.

Gross Profit = $300,000

GP ratio = 55.56%

Explanation:

Terms of sale 3/10, n/30 means there is a discount of 3% is available on payment of due amount within discount period of 10 days after sale with net credit period of 30 days.

As the customer does not pay within the discount period, so there will not any discount be given.

Gross Profit is net of Sales and Cost of Goods sold, it is a return that a company earn directly from the sales of product or service before dealing operating expenses.

Sales $540,000

Cost of Goods sold $240,000

Gross Profit $300,000

Gross Profit ratio is a ratio of Gross profit to the sales value, It measure the proportion of Gross profit in sales.

Gross profit ratio = Gross profit / Sales = $300,000 / $540,000 = 0.5555

Gross profit ratio = 55.56%