The following information is for Barrel and its competitor Crate. ?BarrelCrate?Year 1Year 2Year 1Year 2Net sales ?$347,850$365,418$579,750$664,395Cost of sales ?121,747146,167318,862312,265Required:1. Calculate the dollar amount of gross margin and the gross margin ratio to the nearest percent, for each company for both years.2. Which company had the more favorable ratio for each year?3. Which company had the more favorable change in the gross margin ratio over this 2-year period?
What will be an ideal response?
| 1. | Barrel | Crate |
| Year 1 | Year 2 | Year 1 | Year 2 |
| Net sales | $347,850 | $365,418 | $579,750 | $664,395 |
| Cost of sales | 121,747 | 146,167 | 318,862 | 312,265 |
| Gross Margin | $226,103 | $219,251 | $260,888 | $352,130 |
| Barrel | Crate |
| Year 1 | Year 2 | Year 1 | Year 2 |
| Gross profit | $226,103 = 65% | $219,251 = 60% | $260,888 = 45% | $352,130 = 53% |
| ratio | $347,850 | $365,418 | $579,750 | $664,395 |
2. Barrel had the more favorable ratio for each year.
3. Crate's gross margin ratio is increasing, while Barrel's is decreasing. Moreover, these changes appear significant and warrant further analysis.
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