Florida General Contractor Practice Exam

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A company has an income of 200,000. If it wants to achieve a gross profit of 40%, what should be the cost of goods sold?

80,000
100,000
120,000
140,000

The correct answer is: 100,000

To determine the required cost of goods sold (COGS) to achieve a gross profit of 40% on an income of $200,000, we first need to understand what gross profit means in this context. Gross profit is the amount remaining from sales after deducting the cost of goods sold. A gross profit of 40% on total income of $200,000 signifies that the company aims to retain 40% of its sales as profit. This means that 60% of the total income will represent the cost of goods sold. To calculate this, we can find 40% of the income: - Gross profit = 40% of $200,000 = 0.40 x $200,000 = $80,000 Now, since gross profit represents the difference between income and COGS, we can rearrange the equation to find COGS: - COGS = Total Income - Gross Profit - COGS = $200,000 - $80,000 = $120,000 Thus, the cost of goods sold necessary to achieve a gross profit of 40% on an income of $200,000 is $120,000.