American Importers Reports Net Income of $50,000 and Cost of Goods

question 125

Multiple Choice

American Importers reports net income of $50,000 and cost of goods sold of $450,000. If the company's gross profit rate was 40%, net sales were

• A) $750,000.
• B) $1,125,000.
• C) $1,175,000.
• D) $825,000.

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Definitions:

Profits

The financial gain achieved when the revenues from business operations exceed the expenses, costs, and taxes involved in sustaining the operation.

Opportunity Costs

The value of the best alternative that is foregone when a different option is chosen.

Special Order

A one-time order that is not considered part of the company’s normal ongoing business.

Capacity

The maximum output that a business can produce in a given period with available resources.