Question

Pederson Company reported the following:

Manufacturing costs $2,500,000
Units manufactured $50,000
Units sold 43000 sold for $75 per unit units.
Beginning inventory 0 units.


What is the amount of gross profit margin?

A. $5,375,000

B. $3,225,000

C. $1,075,000

D. $1,250,000

Answer 1

$1075000 ( C )

Step-by-step explanation:

The gross profit margin is the metric used to determine the amount of money left over for a company after deducting the cost of producing sold goods from the Revenue generated from the sale of the goods. and it is usually represented as percentage of sales

To calculate Gross profit margin

(Revenue generated from sales - cost of sold goods) ( equation 1 )

Revenue generated = 43000(units sold) * $75(unit price)

= $3225000

cost of sold goods = unit cost * units sold

= $50 (unit cost ) * 43000 ( unit sold )

= $2150000

unit cost of production = total manufacturing cost / units manufactured

= $2500000 / 50000 = $50

hence back to equation 1

= ( $3225000 - $2150000 ) = $1075000 ( C )

Answer 2

The correct option is C,$1075,000.00 as computed below.

Step-by-step explanation:

The following relates to computation of gross profit margin for Pederson Company:

Sales revenue ($75*43000) $ 3,225,000.00

Manufacturing costs $2,500,000.00

less closing stock

$2500000/50000*(50000-43000) ($350,000)

( $2,150,000.00)

Gross profit margin $1,075,000.00

Cost of closing inventory of $350000 was deducted from total manufacturing costs to arrive at costs of goods sold, which was then deducted from sales revenue to arrive gross profit margin on the 43000 units sold.