Chapter 5, Problem 15QS

To determine

Concept Introduction:

Net sales

Net sales is deducting Sales discount and sales returns and allowances from gross sales. It is calculated as showen below-

  $\text{Net sales=Sales-Sales dicount-Sales returns and allowances}$

Gross profit

Gross profit is calculated by deducting cost of goods sold from Net sales. Formula to calculate gross profit is as follows-

  $\text{Gross profit = Net sales – Cost of goods sold}$

Gross profit ratio

Gross profit ratio assesses the profitability of the company by stating gross profit as a percenatge of sales. It is calculated by usimg following formula-

  $\text{Gross profit ratio = }\frac{\text{Gross profit}}{\text{Net sales}}\times \text{ 100}$

To Compute:

To compute net sales, gross profit and gross profit ratio and to intrepret the gross profit ratio of Carrier.