The following data is from the income statement of Ralston Company: $ 2,500 (1,350) (650) Revenue Cost of goods sold Operating expenses Net income $4 500 What is the company's gross margin percentage? (Round your answers to three decimal places.):
The following data is from the income statement of Ralston Company: $ 2,500 (1,350) (650) Revenue Cost of goods sold Operating expenses Net income $4 500 What is the company's gross margin percentage? (Round your answers to three decimal places.):
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Income Statement Data Analysis
#### The following data is extracted from the income statement of Ralston Company:
- **Revenue**: $2,500
- **Cost of goods sold**: $1,350
- **Operating expenses**: $650
- **Net income**: $500
---
#### Question:
**What is the company's gross margin percentage? (Please round your answers to three decimal places):**
---
### Explanation:
The income statement provides essential information about the company’s financial performance over a specific accounting period. Below are the key details:
1. **Revenue**: Total income generated from sales of goods or services.
2. **Cost of Goods Sold (COGS)**: Direct costs attributable to the production of the goods sold by the company.
3. **Operating Expenses**: Indirect expenses incurred during the normal course of business operations.
4. **Net Income**: The profit after all expenses have been deducted from total revenue.
To calculate the Gross Margin Percentage, use the following formula:
\[
\text{Gross Margin Percentage} = \left( \frac{\text{Revenue} - \text{Cost of Goods Sold}}{\text{Revenue}} \right) \times 100
\]
Given the data:
- Revenue: $2,500
- Cost of Goods Sold: $1,350
\[
\text{Gross Margin} = \text{Revenue} - \text{Cost of Goods Sold} = 2500 - 1350 = 1150
\]
\[
\text{Gross Margin Percentage} = \left( \frac{1150}{2500} \right) \times 100 = 46.000\%
\]
Therefore, the company's gross margin percentage is **46.000%**.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb75e2346-ebf2-4e14-802c-14c74b6109ef%2F33822bfd-4aef-49c4-8a4f-8c0bf5df044c%2Fnkxmc4b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Income Statement Data Analysis
#### The following data is extracted from the income statement of Ralston Company:
- **Revenue**: $2,500
- **Cost of goods sold**: $1,350
- **Operating expenses**: $650
- **Net income**: $500
---
#### Question:
**What is the company's gross margin percentage? (Please round your answers to three decimal places):**
---
### Explanation:
The income statement provides essential information about the company’s financial performance over a specific accounting period. Below are the key details:
1. **Revenue**: Total income generated from sales of goods or services.
2. **Cost of Goods Sold (COGS)**: Direct costs attributable to the production of the goods sold by the company.
3. **Operating Expenses**: Indirect expenses incurred during the normal course of business operations.
4. **Net Income**: The profit after all expenses have been deducted from total revenue.
To calculate the Gross Margin Percentage, use the following formula:
\[
\text{Gross Margin Percentage} = \left( \frac{\text{Revenue} - \text{Cost of Goods Sold}}{\text{Revenue}} \right) \times 100
\]
Given the data:
- Revenue: $2,500
- Cost of Goods Sold: $1,350
\[
\text{Gross Margin} = \text{Revenue} - \text{Cost of Goods Sold} = 2500 - 1350 = 1150
\]
\[
\text{Gross Margin Percentage} = \left( \frac{1150}{2500} \right) \times 100 = 46.000\%
\]
Therefore, the company's gross margin percentage is **46.000%**.
![### Gross Margin Percentage Question
**Question:**
What is the company's gross margin percentage?
**Answer Options (Multiple Choice):**
- 20.000%
- 46.000%
- 54.000%
- 43.480%
**Instructions:**
Select the correct gross margin percentage from the options provided. This exercise is designed to help you understand and calculate the gross margin percentage, which is a critical financial metric indicating the percentage of revenue that exceeds the cost of goods sold (COGS).
**Explanation:**
Gross margin percentage is calculated using the formula:
\[ \text{Gross Margin Percentage} = \left(\frac{\text{Revenue} - \text{COGS}}{\text{Revenue}}\right) \times 100 \% \]
This concept is important for evaluating a company's financial health, pricing strategy, and cost management effectiveness.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb75e2346-ebf2-4e14-802c-14c74b6109ef%2F33822bfd-4aef-49c4-8a4f-8c0bf5df044c%2Fmxppy75_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Gross Margin Percentage Question
**Question:**
What is the company's gross margin percentage?
**Answer Options (Multiple Choice):**
- 20.000%
- 46.000%
- 54.000%
- 43.480%
**Instructions:**
Select the correct gross margin percentage from the options provided. This exercise is designed to help you understand and calculate the gross margin percentage, which is a critical financial metric indicating the percentage of revenue that exceeds the cost of goods sold (COGS).
**Explanation:**
Gross margin percentage is calculated using the formula:
\[ \text{Gross Margin Percentage} = \left(\frac{\text{Revenue} - \text{COGS}}{\text{Revenue}}\right) \times 100 \% \]
This concept is important for evaluating a company's financial health, pricing strategy, and cost management effectiveness.
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