Question

The following information was drawn from the annual reports of two companies.

Company A Company B
Sales revenue $ 1,000 $ 2,000
Cost of goods sold (600) (1,100)
Gross margin 400 900
Operating expenses (220) (700)
Operating income 180 200
Gain on sale of equipment 150 0
Net income $ 330 $ 200
Based on this information, Company A’s gross margin percentage is

a. 60%.
b. 55%.
c. 45%.
d. 40%.

Answer 1

The answer is D.

Step-by-step explanation:

Gross profit or margin is the profit a business generate after deducting cost of sales from its sales or revenue.

Gross profit or margin percentage is expressed as gross profit/sales(revenue) x 100

In the question, gross profit for company A is $400 and sales is $1000

Therefore, gross profit percentage is 400/1000 x 100

=40%