Chapter 6Merchandising Activitie s Ex. 6.4
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PROBLEM 6.1A
Claypool earned a gross profit rate of 32%, which is significantly higher than the industry average. Claypool’s sales were above the industry average, and it earned $77,968 more gross profit than the “average” store of its size. This higher gross profit was earned even though its cost of goods sold was $18,000 to $20,000 higher than the industry average because of the additional transportation charges.
To have a higher-than-average cost of goods sold and still earn a much larger-than-average amount of gross profit, Claypool must be able to charge substantially higher sales prices than most hardware stores. Presumably, the company could not charge such prices in a highly competitive environment. Thus, the remote location appears to insulate it from competition and allow it to operate more profitably than hardware stores with nearby competitors.
PROBLEM 6.5A
c. Yes. Sole Mates should take advantage of 1/10, n/30 purchase discounts, even if it
must borrow money for a short period of time at an annual rate of 11%. By
taking advantage of the discount, the company saves 1% by making payment 20 days early. At an interest rate of 11% per year, the bank charges only 0.6%
interest over a 20-day period (11% X 20/365 = 0.6%). Thus, the cost of passing up the discount is greater than the cost of short-term borrowing.
Chapter 7 Financial assets
Chapter 8 Inventories and the cost of goods sold
Supplementary Problem
Chapter 9
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17。