Gannon Company had the following information at December 31: Finished goods inventory, January 1 $50,000 Finished goods

Gannon Company had the following information at December 31:

Finished goods inventory, January 1 $50,000
Finished goods inventory, December 31 $150,000

If the cost of goods manufactured during the year amounted to $2,100,000 and annual sales were $2,750,000, the amount of gross profit for the year is ___.

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  1. Answer:

    $750,000

    Explanation:

    In this example, the amount of gross profit for the year is $750,000. Gross profit (or gross margin) refers to the total revenue of a business minus the cost of goods sold (COGS). It is important to know a company’s gross profit, as this reflects the profit before operating expenses, interest payments and taxes. In this example:

    $2,750,000 – $2,100,000 = $650,000

    $650,000 – $50,000 = $600,000

    $600,000 + $150,000 = $750,000

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