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11 May, 21:14

Margaret Company reported the following information for the current year: Net sales $3,000,000 Purchases $1,957,000 Beginning Inventory $245,000 Ending Inventory $115,000 Cost of Goods Sold 65% of sales Industry Averages available are: Inventory Turnover 5.29 Gross Profit Percentage 28% How do the inventory turnover and gross profit percentage for Margaret Company compare to the industry averages for the same ratios? (Round inventory turnover to two decimal places. Round gross profit percentage to the nearest percent.)

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  1. 11 May, 21:31
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    10.84 times

    Explanation:

    The computation of inventory turnover is shown below:-

    Gross Profit Percentage = Gross Profit : Net Sales * 100

    Gross Profit = Sales - Cost of Goods Sold

    = $3,000,000 * 65%

    Cost of goods sold = $1,950,000

    Gross Profit = $3,000,000 - $1,950,000

    = $1,050,000

    Gross Profit Percentage = $1,050,000 : $3,000,000 * 100

    = 35%

    Inventory Turnover = Cost of Goods Sold : Average Inventory

    = ($245,000 + $115,000) : 2

    Average Inventory = $180,000

    Inventory Turnover = Cost of goods sold : Average inventory

    = $1,950,000 : $180,000

    = 10.84 times
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