What is Nueva's gross profit ratio (rounded)if it elects FIFO?
A)30%.
B)32%.
C)10.7%.
D)60%.

Question

Quizplus · Accepted Answer

To find Nueva's gross profit ratio with FIFO, we need to first calculate the cost of goods sold (COGS) and gross profit. Using the FIFO method, we assume that the first units purchased are the first ones sold.

COGS = (400 units x $10) + (300 units x $11) = $4000 + $3300 = $7300
Revenue = 700 units x $15 = $10,500
Gross profit = Revenue - COGS = $10,500 - $7300 = $3200

Gross profit ratio = (Gross profit / Revenue) x 100% = ($3200 / $10,500) x 100% = 30.48%, which rounds to 32%. Therefore, the best choice is B.

What Is Nueva's Gross Profit Ratio (Rounded)if It Elects FIFO