Given the following account balances for Dooley Corp and Thompson Corp, which company has a better Gross Profit Rate?

1) Dooley Corp
2) Thompson Corp

Question

High School

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Answer :

nazmalik855 nazmalik855 · Answer 1 · 2025-03-22T14:21:44-04:00

Thompson Corp has a better Gross Profit Rate than Dooley Corp.

To calculate the Gross Profit Rate, we use the formula:

[tex]\[ \text{Gross Profit Rate} = \left( \frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \right) \times 100 \][/tex]

For Dooley Corp:

Net Sales = $500,000

Cost of Goods Sold = $300,000

Gross Profit Rate for Dooley Corp:

[tex]\[ \text{Gross Profit Rate}_{\text{Dooley}} = \left( \frac{500,000 - 300,000}{500,000} \right) \times 100 \][/tex]

[tex]\[ = \left( \frac{200,000}{500,000} \right) \times 100 \][/tex]

[tex]\[ = 0.4 \times 100 \][/tex]

[tex]\[ = 40\% \][/tex]

For Thompson Corp:

Net Sales = $600,000

Cost of Goods Sold = $320,000

Gross Profit Rate for Thompson Corp:

[tex]\[ \text{Gross Profit Rate}_{\text{Thompson}} = \left( \frac{600,000 - 320,000}{600,000} \right) \times 100 \][/tex]

[tex]\[ = \left( \frac{280,000}{600,000} \right) \times 100 \][/tex]

[tex]\[ = 0.4667 \times 100 \][/tex]

[tex]\[ = 46.67\% \][/tex]

Therefore, Thompson Corp has a better Gross Profit Rate of 46.67% compared to Dooley Corp's Gross Profit Rate of 40%.

Complete Question:

Given the following account balances for Dooley Corp and Thompson Corp, which company has a better Gross Profit Rate?