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Review of the financial statements revealed the following for Sonoma Inc.: Sales $1,250,000, Net income $37,500, Total assets $650,000, Long-term debt $750,000, Interest expense $65,000 and Cost of goods sold $775,000.
-What is the Sonoma's gross profit margin closest to:
A)3%
B)38%
C)52%
D)62%

Question

Quizplus · Accepted Answer

Gross profit can be calculated as sales minus cost of goods sold. 
Gross profit = $1,250,000 - $775,000 = $475,000 
Gross profit margin can be calculated as (gross profit ÷ sales) x 100. 
Gross profit margin = ($475,000 ÷ $1,250,000) x 100 = 38% 
Therefore, the closest option is B) 38%.

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