6.4 Learning Objective 6-4
1) For most firms, the gross profit percentage changes significantly from year to year.
2) The gross profit percentage is net sales divided by gross profit.
3) The inventory turnover ratio should be the same for all types of industries.
4) A gross profit percentage of 30% means that:
A) for each dollar of sales, the company has a cost of goods sold of seventy cents.
B) for each dollar of sales, the company has a gross profit of thirty cents.
C) for each dollar of sales, the company has a cost of goods sold of thirty cents.
D) both A and B are true.
5) The inventory turnover ratio:
A) is determined by dividing cost of goods sold by net sales.
B) shows how many times the company sold its average level of inventory.
C) should be high for a company that sells high-priced inventory items.
D) will be lower for companies that have many low-priced items in their inventory.
6) The gross profit percentage is calculated as:
A) cost of goods sold divided by net sales revenue.
B) net sales revenue minus gross profit on sales.
C) net sales revenue minus cost of goods sold.
D) gross profit divided by net sales revenue.
7) Marian Company has the following items for the month of July:
Sales revenue
|
$476,300
|
Cost of goods sold
|
$330,000
|
Beginning inventory
|
$67,400
|
Ending inventory
|
$78,200
|
Inventory turnover is:
A) 3.96.
B) 4.22.
C) 4.53.
D) 4.90.
8) Maydak Company has the following items for the month of July:
Sales revenue
|
$620,000
|
Cost of goods sold
|
$300,000
|
Beginning inventory
|
$67,400
|
Ending inventory
|
$78,200
|
The gross profit percentage is:
A) 25.0%.
B) 34.9%.
C) 51.6%.
D) 65.0%.
9) Thomas Industries reported the following:
Net Sales
|
$450,000
|
Cost of goods sold
|
$360,000
|
Operating expenses
|
$60,000
|
Tax Rate
|
40%
|
The gross profit percentage is:
A) 80%.
B) 60%.
C) 32%.
D) 20%.
10) Margaret Company has the following information available for the current year:
Net sales
|
$3,000,000
|
Purchases
|
$1,800,000
|
Beginning Inventory
|
$265,000
|
Ending Inventory
|
$115,000
|
Cost of Goods Sold
|
65% of Sales
|
Industry Averages available are:
Inventory Turnover
|
5.29
|
Gross Profit Percentage
|
28%
|
How do the inventory turnover and gross profit percentage for Margaret Company compare to the industry averages for the same ratios?
A) Margaret Company has superior gross profit percentage and inventory turnover.
B) Margaret Company has superior gross profit percentage and inferior inventory turnover.
C) Margaret Company has inferior gross profit percentage and superior inventory turnover.
D) Margarent Company has inferior gross profit percentage and inventory turnover.
11) Scott Walker Company has the following data available for the past year:
Net sales
|
$450,000
|
Purchases
|
$200,000
|
Beginning Inventory
|
$130,000
|
Ending Inventory
|
$160,000
|
Cost of Goods Sold
|
$270,000
|
Industry Averages available are:
Inventory Turnover
|
5.00
|
Gross Profit Percentage
|
50%
|
How do the inventory turnover and gross profit percentage for Scott Walker Company compare to the industry averages for the same ratios?
A) Walker Company is superior on both measures.
B) Walker Company is inferior on both measures.
C) Walker Company is inferior on one measure and superior on the other measure.
D) There is not enough information.
12) For discount retailers such as Walmart, inventory turnover equals:
A) sales divided by average inventory
B) cost of goods sold divided by average inventory
C) sales discounts divided by average receivables
D) sales divided by average receivables