Bowring Company took the following data from their income statement at the end of the current year.
$$\begin{array} { l r }
\text { Per-unit product cost: } & \$ 30 \
\text { Gross margin percentage: } & 40 \% \
\text { Selling and admini strative expenses } & \$ 30,000 \
\text { Operating income } & \$ 10,000
\end{array}$$
-Refer to the Figure.What was the cost of goods sold for the year?
A)$40,000
B)$50,000
C)$60,000
D)$100,000

Question

Bowring Company took the following data from their income statement at the end of the current year.
 $$\begin{array} { l r } 
\text { Per-unit product cost: } & \$ 30 \
\text { Gross margin percentage: } & 40 \% \
\text { Selling and admini strative expenses } & \$ 30,000 \
\text { Operating income } & \$ 10,000
\end{array}$$
-Refer to the Figure.What was the cost of goods sold for the year?
A)$40,000
B)$50,000
C)$60,000
D)$100,000

Quizplus · Accepted Answer

To find the cost of goods sold (COGS), we can use the given operating income and selling and administrative expenses to backtrack to the gross margin. Operating income is given as $10,000, and selling and administrative expenses are $30,000. Adding these together gives us the gross margin: $10,000 + $30,000 = $40,000. Since the gross margin percentage is 40%, this $40,000 represents 40% of sales. To find 100% of sales, we divide $40,000 by 40% (or 0.4), which gives us $100,000 as total sales. The cost of goods sold is then the difference between sales and the gross margin: $100,000 (sales) - $40,000 (gross margin) = $60,000.

Bowring Company Took the Following Data from Their Income Statement