MBI, Inc., had sales of $141.6 million for fiscal 2010. The company\'s gross pro

Question

MBI, Inc., had sales of $141.6 million for fiscal 2010. The company's gross profit ratio for that year was 31.6%.


Required:
(a)
Calculate the gross profit and cost of goods sold for MBI, Inc., for fiscal 2010. (Round your answers to 1 decimal place. Enter your answers in millions. Omit the "$" sign in your response.)



Gross profit $ million
Cost of goods sold $ million

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(b)
Assume that a new product is developed and that it will cost $1,860 to manufacture. Calculate the selling price that must be set for this new product if its gross profit ratio is to be the same as the average achieved for all products for fiscal 2010. (Round your answer to 1 decimal place. Omit the "$" sign in your response.)


Selling price $

Explanation / Answer

Gross profit ratio expresses relationship between gross profit and net sales. It is obtained by dividing gross profit by net sales and expressing this relationship as a percentage. Gross profit is obtained by deducting cost of goods sold from net sales. SO GP Ratio = (Net Sales-COGS)/Net Sales = 31.6% ie (Net Sales-COGS) = 31.6%*Net Sales ie COGS = 68.4%*Net Sales = 68.4%*141.6 = $96.85M.......Ans (1) Gross Profit = Sales - COGS = 141.60-96.85 = $44.75M .....Ans (2) Part (b) COGS = $1860 From above, COGS = 68.4%*Net Sales So Sale price = COGS/68.4% = 1860/68.4% = $2,719.30 ......Ans (b)

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