Question

PA6-3 Recording Sales with Discounts and Returns and Analyzing Gross Profit Percentage [LO 6-4, LO 6-5]...

PA6-3 Recording Sales with Discounts and Returns and Analyzing Gross Profit Percentage [LO 6-4, LO 6-5]

[The following information applies to the questions displayed below.]

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a. Sold merchandise for cash (cost of merchandise $40,797). $ 75,200
b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $540 ). 900
c. Sold merchandise (costing $7,600 ) to a customer on account with terms n/60. 16,000
d. Collected half of the balance owed by the customer in (c). 8,000
e. Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. 256

PA6-3 Part 4

  1. Hair World is considering a contract to sell merchandise to a hair salon chain for $21,000. This merchandise will cost Hair World $12,880. What would be the increase (or decrease) to Hair World’s gross profit and gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)

PA6-3 Recording Sales with Discounts and Returns and Analyzing Gross Profit Percentage [LO 6-4, LO 6-5]

[The following information applies to the questions displayed below.]

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a. Sold merchandise for cash (cost of merchandise $40,797). $ 75,200
b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $540 ). 900
c. Sold merchandise (costing $7,600 ) to a customer on account with terms n/60. 16,000
d. Collected half of the balance owed by the customer in (c). 8,000
e. Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. 256

PA6-3 Part 4

  1. Hair World is considering a contract to sell merchandise to a hair salon chain for $21,000. This merchandise will cost Hair World $12,880. What would be the increase (or decrease) to Hair World’s gross profit and gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)

Answer is complete but not entirely correct.

Gross Profit

increasedselected answer correct

by

$8,120selected answer correct

Gross Profit Percentage

decreasedselected answer correct

to

38.7selected answer incorrect

%

0 0
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Answer #1
With current data:
Sales revenue ($75,200 + $16,000) $91,200
Less: Sales Returns and allowances ($900 + $256) ($1,156)
Net Sales $90,044
Less: Cost of goods sold ($40,797 - $540 + $7,600) ($47,857)
Gross Profit $42,187
Gross profit rate ($42,187/$90,044*100) 46.9%
With new sale:
Sales revenue ($75,200 + $16,000 + $21,000) $112,200
Less: Sales Returns and allowances ($900 + $256) ($1,156)
Net Sales $111,044
Less: Cost of goods sold ($40,797 - $540 + $7,600 + $12,880) ($60,737)
Gross Profit $50,307
Gross profit rate ($50,307/$112,200*100) 45.3%
Therefore, Gross profit is increased from $42,187 to $50,307 and the gross profit rate is decreased from 46.9% to 45.3%.
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