Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 42

Calculate gross profit, cost of goods sold, and selling price MBI, Inc., had sales of $141.6 million for fiscal 2010. The company’s gross profit ratio for that year was 31.6%.

Required:

a. Calculate the gross profit and cost of goods sold for MBI, Inc., for fiscal 2010.

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b. Assume that a new product is developed and that it will cost $1,860 to manufacture. Calculate the selling price that must be set for this new product if its gross profit ratio is to be the same as the average achieved for all products for fiscal 2010.

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c. From a management viewpoint, what would you do with this information?

Step 1 of 6

Compute Gross profit ratio, COGS and selling price

Gross profit ratio: The gross profit ratio deals with the difference between costs to produce product and amount for which this product is sold. The formula for calculating the gross profit ratio is