Chapter 3, Problem 1OR

For the quarter ended January 28, 2017, Kroger reported sales of $27.61 billion and cost of goods sold of $21.4 7 billion. What was the company’s gross profit margin that quarter?

Summary Introduction

To discuss:

Compute company’s gross margin in the quarter.

Introduction:

Gross profit margin also called as gross margin depicts the percentage of sale revenue after the deduction of direct costs.

Answer to Problem 1OR

The gross margin of K Company in the quarter is 0.2224 or 22.24%.

Explanation of Solution

Given information:

K Company has sales of $27061 billion and the cost of goods sold is 21.47 billion.

The formula to calculate the gross margin:

$\begin{array}{c}\text{Gross margin}=\frac{\text{Sales}-\text{Cost of Goods Sold}}{\text{Sales}}\\ =\frac{27.61-21.47}{27.61}\\ =\frac{6.14}{27.61}\\ =0.2224\end{array}$

Hence, the gross margin of K Company in that quarter is 0.2224 or 22.24%.