Given the costs you just calculated and recognized that the company typically sets its selling price at 130% of its product costs, what level of sales would Kevin have expected? What gross margin percentage would this generate?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Given the costs you just calculated and recognized that the company typically sets its selling price at 130% of its product costs, what level of sales would Kevin have expected? What gross margin percentage would this generate?

Kevin, the manager at Flint's Danishes, was excited to determine the company's profit this year. It was a break-out year for the
company, especially after being selected to cater the World College Club Sports Athletes' Annual Meeting. The company was thrilled!
The number and variety of danishes produced for that event alone doubled the company's sales for the year. Kevin knew the total
sales amount but had yet to determine the total COGS. He hoped that it would be low relative to sales. Here are the transactions and
amounts Kevin found when gathering information for his COGS calculation.
Transaction Description
Advertising
Flour, eggs, sugar
Depreciation on baking equipment and kitchen
Delivery expense
Wages (baking employees)
Research and development
Utilities for bakery space
Investment in mutual fund
Cash proceeds from loan
Wages (indirect labor)
Salaries (executives and office staff)
Amount
$13,000
262,000
45,000
8,800
368,000
5,200
22,000
58,000
48,000
42,000
119,000
Kevin was sure that not all of these amounts should be included in COGS but didn't know how to correctly sort them.
Transcribed Image Text:Kevin, the manager at Flint's Danishes, was excited to determine the company's profit this year. It was a break-out year for the company, especially after being selected to cater the World College Club Sports Athletes' Annual Meeting. The company was thrilled! The number and variety of danishes produced for that event alone doubled the company's sales for the year. Kevin knew the total sales amount but had yet to determine the total COGS. He hoped that it would be low relative to sales. Here are the transactions and amounts Kevin found when gathering information for his COGS calculation. Transaction Description Advertising Flour, eggs, sugar Depreciation on baking equipment and kitchen Delivery expense Wages (baking employees) Research and development Utilities for bakery space Investment in mutual fund Cash proceeds from loan Wages (indirect labor) Salaries (executives and office staff) Amount $13,000 262,000 45,000 8,800 368,000 5,200 22,000 58,000 48,000 42,000 119,000 Kevin was sure that not all of these amounts should be included in COGS but didn't know how to correctly sort them.
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