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During its first month of operations, Purrfect Pets purchased 6,600 bags of dog food at a...

During its first month of operations, Purrfect Pets purchased 6,600 bags of dog food at a cost of $4 a bag and sold all 6,600 bags of dog food on account with payment terms of 2/10, n/30 for $11 each. A total of 2,400 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended. Sales allowances totaling $220 were granted to customers whose dogs did not like the dog food. Required: Calculate the gross profit for the month. Calculate the gross profit percentage for the month.

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Answer #1

Cash discount = 2400*$11*2% = $528

Sales = 6600*$11 = $72600

Cost of goods sold = 6600*$4 = $26400

Net sales = $72600 - $528 -$220 = $71852

Gross profit = $71852 - $26400 = $45452

Gross profit% = 63.26%

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