You know these facts about a company’s prior calendar year:

Question:- You know these facts about a company’s prior calendar year:

• Beginning inventory: 100 units at $10 each

• Ending inventory: 50 units at $9 each

• Inventory purchased for resale during the year: $2,000

What can you calculate using this information? Select all that apply.

1:-Gross sales

2:-Net profit

3:-Contribution margin

4:-Cost of goods sold

5:-None of the above

Answer

Based on the information provided, here are the financial metrics that can be calculated:

Cost of goods sold:

To determine COGS, one can simply add together the beginning inventory, $100 * 10 = 1000 dollars, and purchases of goods and subtract ending inventory.

Final or ending inventory = 50*$9 = 450 dollars

Acquisitions or adding purchases = 2000 dollars

Thus COGS = Initial stock + Acquisitions – Final inventory.

= $1,000 + $2,000 – $450

= $2,550

Gross sales:

Gross sales will be calculated by adding gross margin to the cost of goods sold ($2,550). If you lack information on the gross margin percentage, accurate determination of gross sales is impossible.

Net profit:

With the information provided, net profit cannot be calculated because there are no data on revenue or operating costs. Cost of goods sold is just one aspect for the calculation on net profit.

Contribution margin:

It is impossible to determine the contribution margin using such information, because there are no sales revenue that can be subtracted from COGS.

To conclude, only one financial indicator can be calculated with the information given – cost of goods sold. Revenue information is needed to establish the factual figures of gross sales and net income. Contribution margin needs data on sales revenue and cost of goods sold.