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Pioneer’s annual inventory count took place on 6th Jan 2006. The value of inventory on this date was $32,780. During the period from 31 December 2005 to 6 Jan 2006 the following events occurred .
sales $8,600
purchases $4,200
the value of inventory at 31 December 2005 was $34,600.
What is the gross margin of pioneer?
sir here in this question i don’t get why are we subtracting purchases?
OI+P-CI=COS so to get gross profit .. subtract revenue by cos..i get this part ..but i dont get why are we subtracting purchase? instead of adding it up…I have no idea what you are asking!
The cost of sales is as you have written and is therefore 6,020.
The gross profit is also as you have written and is therefore 2,580.
Therefore the gross margin is 2,580/6,020.
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