Item 23 Old Antique Store prepared the following budget information for the month of May: Sales are budgeted at $360,000. All sales are on account and a provision for bad debts is made for each month at three percent of sales for the month. Inventory was $84,000 on April 30; an inventory increase of $12,000 is planned for May 31. All inventory is marked to sell at cost plus 50 percent. Estimated cash disbursements for selling and administrative expenses for the month are $48,000. Depreciation for May is projected at $6,000. Old Antique 's budgeted gross profit for May is:

Gross profit is the profit that a company have earned from the customers after deducting its cost of goods sold. The other expenses are then deducted from this gross profit and then the net profit is calculated.

Sales $360,000

Less: Provision for Bad debts $10,800 (360,000 * 3%)

Net Sales $349,200

Less: Cost of Goods Sold $96,000 (84000+12000)

Less: Administrative expenses $48,000

Less: Depreciation $6,000

Gross Profit $199,200

The Sales is reduced by the allowance for bad debts, the net sales are arrived. However these net sales are then deducted from the relevant expenses such as cost of goods sold, administrative expenses and the depreciation.

Cost of Goods sold are calculated by adding the increase in inventory in the opening inventory.

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