Respuesta :
The amount of net sales for Schmitzer inc. for the year 2021 is $400,000 as per the given inventory and gross profit ratio
Financial ratios are a useful indicator of the financial health of a company and can also be used to compare the performance of a company over different periods or with different companies in the same or different industries.
First, we determine the cost of goods sold using the data available for inventory turnover and ending inventory balances, as follows:
[tex]Inventory\ Turnover = \frac{Cost\ of\ Goods\ Sold}{\frac{Beginning\ Inventory + Ending\ Inventory}{2}}[/tex]
The above formula is the inventory turnover and gives an indication of the number of times the inventory of a company is sold.
Cost of goods sold = Inventory Turnover*(Beginning inventory + Ending inventory)/2
= 4*(49000 + 61000)/2
Cost of goods sold = $220000
Next, we use the calculated amount of cost of goods sold amounting to $220,000 and the gross profit ratio to determine the net sales:
Net sales = Cost of goods sold/100% - Gross profit Ratio
= 220000/100% - 45%
= 220000/0.55
= $400000
Note that the denominator used above (100% - 40%) is the cost of goods sold ratio, which is the proportion of the cost of goods sold of net revenues. Hence, dividing the cost of goods sold would yield the number of net sales of $400,000.
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