BAT CH5 04

A company shows the following balances: Sales $1,000,000; Sales returns and allowances 250,000; Cost of goods sold 600,000; Operating expenses 75,000. What is the company’s profit margin?

• 0.075
• 0.1
• 0.15
• 0.3

Which of the following is not needed to calculate the gross profit margin?

• Sales
• Sales Returns and Allowances
• Cost of Goods Sold
• Operating Expenses

Profit margin is improved when

• sales revenue increases.
• gross profit decreases.
• operating expenses increase.
• the cost of goods sold increases.

Profit margin measures the extent by which selling price covers

• operating expenses.
• the cost of goods sold.
• all expenses.
• income taxes.

The calculation of net purchases includes all off the following except:

• freight in
• freight out
• purchases discounts
• purchases returns

When the buyer pays for freight costs, this entails

• a debit to the freight in account.
• a debit to the purchases account.
• a debit to the inventory account.
• a debit to the sales account.

Profit margin is calculated as

• net income ÷ sales revenue.
• net income ÷ net sales.
• gross profit ÷ sales revenue.
• gross profit ÷ cost of goods sold.

In a profitable company, the gross profit margin will always be _________ the profit margin.

• higher than
• lower than
• equal to
• The gross profit margin and the profit margin can never be the same.

The Cost of Goods Sold account

• is a temporary account.
• is a permanent account.
• appears on the balance sheet as an asset.
• appears on the income statement as an operating expense.

When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do not agree with the physical count

• has an effect on Cost of Goods Sold.
• has no effect on Cost of Goods Sold.
• requires reporting a loss when actual is higher than records.
• requires reporting a gain when actual is lower than records.