Question

During 2024, its first year of operations, Hollis Industries recorded sales of $11,900,000 and experienced returns of $760,000. Cost of goods sold totaled $7,140,000 (60% of sales). The company estimates that 8% of all sales will be returned. How much net revenue will Hollis Industries report at the end of its first year of operations?

Answer 1

To calculate the net revenue for Hollis Industries at the end of its first year of operations, you need to subtract the returns and the cost of goods sold from the total sales.

Calculate the returns:

Returns = Total Sales * Return Rate

Returns = $11,900,000 * 8% = $952,000

Calculate the net sales (sales after returns):

Net Sales = Total Sales - Returns

Net Sales = $11,900,000 - $952,000 = $10,948,000

Calculate the cost of goods sold:

Cost of Goods Sold = Total Sales * Cost of Goods Sold Rate

Cost of Goods Sold = $11,900,000 * 60% = $7,140,000

Calculate the net revenue:

Net Revenue = Net Sales - Cost of Goods Sold

Net Revenue = $10,948,000 - $7,140,000 = $3,808,000

Hollis Industries will report a net revenue of $3,808,000 at the end of its first year of operations.

Step-by-step explanation: