Question

The Intramural Sports Club reports sales revenue of $892,000. Inventory at both the beginning and end of the year totals $160,000. The inventory turnover ratio for the year is 4.6.

What amount of gross profit does the company report in its income statement?

Answer 1

Answer:

$524,000

Explanation:

Gross profit = revenue - costs of goods sold

For the Intramural Sports Club, revenue = $892,000.

Finding the cost of goods sold  COGS

Inventory turnover = COGS/ average inventory

inventory turnover=4.6

Average inventory = beginning plus closing inventory /2

in this case, average inventory =$160,000/2

=$80,000

Therefor, 4.6 = COGS/ $80,000

COGS = $80,000 x 4.6

COGS =$368,000

Gross profits= $892,000- $368,000

Gross profit =$524,000

Answer 2

The profit a company makes after deducting all costs associated with creating and selling its products or services is known as gross profit.

Gross Profit=Sales Revenue-Cost of Goods Sold

Cost of Goods sold can be expressed as follows:

COGS = Beginning Inventory + Purchases – Ending Inventory

They didn’t tell you what your purchases were, however they stated the inventory turned over 4.6 times.

However, Beginning and Ending inventory are the same, so $ 160,000 times 4.6 would be how much inventory was purchased during the year.

=160,000 x 4.6 = 736,000

=892,000 – 736,000 = 156,000

Hence, Gross Profit=$156,000

To know more about gross profit, refer to the link:

https://brainly.com/question/7582690