Use the data provided to calculate gross margin for 2019.
| Account | Amount |
| ----------------------------- | -------- |
| Sales | $696,134 |
| Merchandise Inventory | 535,142 |
| Sales Discounts | 57,083 |
| Interest Expense | 3,023 |
| Sales Returns and Allowances | 83,899 |
| Interest Revenue | 10,317 |
| Cost of Goods Sold | 240,581 |
| Rent Expense | 14,590 |
| Depreciation Expense: Office Equipment | 3,282 |
| Insurance Expense | 2,235 |
| Advertising Expense | 12,734 |
| Accounts Receivable | 96,530 |
| Office Supplies Expense | |
| Rent Revenue | 23,419 |
| Sales Salaries Expense | 25,556 |
| Accounts payable | 136,041 |
| Common Stock | 54,644 |
| Marketing expense | 31.452 |
Answer (1)
Calculate Net Sales: Net Sales = Sales - Sales Discounts - Sales Returns and Allowances = $696,134 - $57,083 - $83,899 = $555,152.
Calculate Gross Margin: Gross Margin = Net Sales - Cost of Goods Sold = $555,152 - $240,581 = 314 , 571. − T h e g ross ma r g in f or 2019 i s \boxed{ 314,571} .
Explanation
Understanding the Problem We are given the sales, sales discounts, sales returns and allowances, and cost of goods sold. We need to calculate the gross margin. The gross margin is calculated as net sales less the cost of goods sold. Net sales is calculated as sales less sales discounts and sales returns and allowances.
Calculating Net Sales First, we need to calculate the net sales. Net sales is calculated as follows: Net Sales = Sales - Sales Discounts - Sales Returns and Allowances Net Sales = $696,134 - $57,083 - $83,899
Net Sales Calculation Result Net Sales = $696,134 - $57,083 - $83,899 = $555,152
Calculating Gross Margin Next, we calculate the gross margin. Gross margin is calculated as follows: Gross Margin = Net Sales - Cost of Goods Sold Gross Margin = $555,152 - $240,581
Gross Margin Calculation Result Gross Margin = $555,152 - $240,581 = $314,571
Final Answer Therefore, the gross margin for 2019 is $314,571.
Examples
Understanding gross margin is crucial for businesses. For instance, if a bakery has sales of $500,000, sales discounts of $20,000, sales returns of $10,000, and the cost of goods sold is $200,000, the gross margin would be calculated as follows:
Net Sales = Sales - Sales Discounts - Sales Returns = $500,000 - $20,000 - $10,000 = $470,000 Gross Margin = Net Sales - Cost of Goods Sold = $470,000 - $200,000 = $270,000
This gross margin of $270,000 represents the amount available to cover operating expenses and generate profit. A higher gross margin indicates better profitability and efficiency in managing production costs.
