Mega Skateboard Supplier, Inc. had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:
A)32%.
B)175%.
C)43%.
D)57%.
E)56%.

Question

Quizplus · Accepted Answer

The formula for calculating gross margin ratio is:

Gross margin ratio = (Net sales - Cost of goods sold) / Net sales

Using the figures given in the problem, we can calculate the gross margin ratio as:

Gross margin ratio = (2.8 million - 1.6 million) / 2.8 million

Gross margin ratio = 1.2 million / 2.8 million

Gross margin ratio = 0.42857, or 43%

Therefore, the correct answer is C: 43%.