If the Estimated Rate of Gross Profit Is 30%, What

question 81

Multiple Choice

If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September 30, based on the following data? $\begin{array}{lll}\text { Sep. } 1 & \text { Merchandise inventory } & \$ 125,000 \\\text { Sep. } 1-30 & \text { Purchases(net) } & 300,000 \\\text { Sep. } 1-30 & \text { Sales (net) } & 150,000\end{array}$

• A) $320,000
• B) $192,500
• C) $275,000
• D) $105,000

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Definitions:

Residual Income

Earnings that exceed the minimum required return on investment; it's what remains after all costs and expenses have been deducted.

Return on Investment

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments, calculated as net profit divided by the cost of the investment.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, expressed as a percentage.

Average Operating Assets

The average value of a company's assets used in its operating activities over a certain period.