Use the Information Below to Answer the Following Question(s)

question 55

Multiple Choice

Use the information below to answer the following question(s) :
A retailer operating a network of home improvement stores has annual sales of $800 million,
annual cost of goods and materials purchased of $500 million,and net income of $125 million.
-What is the new profit margin with a 15-percent reduction in the cost of goods and materials purchased,assuming sales and other costs remain unchanged?

• A)10%
• B)15%
• C)20%
• D)25%

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Definitions:

Freight-in Charges

Costs associated with transporting goods from the supplier to the buyer's location.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a reduction in the seller's revenue.

Average Cost Retail Inventory Method

A method used in retail to estimate ending inventory value by combining the cost-to-retail price ratio with the retail price of goods available for sale.

Ending Inventory

The cumulative worth of products ready for purchase at the close of a financial cycle.