American Importers reports net income of $50,000 and cost of goods sold of $450,000. If the company's gross profit rate was 40%, net sales were
A) $750,000.
B) $1,125,000.
C) $1,175,000.
D) $825,000.

Question

Quizplus · Accepted Answer

Gross profit is net sales minus cost of goods sold. If the gross profit rate is 40%, then gross profit is 40% of net sales. We can use this to find net sales:Gross profit = Net sales * Gross profit rate$50,000 = Net sales * 40%Net sales = $50,000 / 40% = $125,000

American Importers Reports Net Income of $50,000 and Cost of Goods