To determine the gross profit for Department K, we need to follow a systematic approach to calculate the gross profit using the information provided. Gross profit is calculated as Sales minus Cost of Goods Sold (COGS). Let's break down the steps:
Step 1: Calculate Cost of Goods Sold (COGS)
COGS can be calculated using the formula:
[
\text{COGS} = \text{Opening Stock} + \text{Purchases} - \text{Closing Stock}
]
For Department K, we have the following values:
- Opening Stock: 2,500
- Purchases: 120,000
- Closing Stock: 3,000
Now, substituting these values into the COGS formula:
[
\text{COGS} = 2,500 + 120,000 - 3,000
]
Calculating this step-by-step:
-
Add Opening Stock and Purchases:
[
2,500 + 120,000 = 122,500
]
-
Subtract Closing Stock:
[
122,500 - 3,000 = 119,500
]
So, the COGS for Department K is
119,500.
Step 2: Calculate Gross Profit
Now that we have the COGS, we can calculate the gross profit using the formula:
[
\text{Gross Profit} = \text{Sales} - \text{COGS}
]
For Department K, the sales amount is:
Substituting the values into the gross profit formula:
[
\text{Gross Profit} = 180,000 - 119,500
]
Calculating this:
[
\text{Gross Profit} = 60,500
]
Conclusion
The gross profit for Department K is
60,500. Therefore, the correct option is
C. #60,500.
Explanation of Other Options
-
Option A: #60,700: This option is incorrect because it does not align with the calculated gross profit of 60,500. It may have resulted from a miscalculation in either COGS or sales.
-
Option B: #23,500: This option is significantly lower than the calculated gross profit. It likely results from a misunderstanding of how to calculate COGS or gross profit.
-
Option D: #82,500: This option is also incorrect. It may have been derived from an incorrect addition or subtraction in the gross profit calculation.
Common Pitfalls
- Miscalculating COGS: Ensure that you correctly add opening stock and purchases before subtracting closing stock.
- Confusing Gross Profit with Net Profit: Remember that gross profit does not account for operating expenses, taxes, or other costs.
- Ignoring Closing Stock: Always remember to subtract closing stock from the total of opening stock and purchases to get an accurate COGS.
Revision Summary
- Gross Profit = Sales - COGS.
- COGS = Opening Stock + Purchases - Closing Stock.
- For Department K, COGS = 119,500 and Sales = 180,000.
- Gross Profit for K is 60,500, making option C the correct answer.