According to the textbook readings, if Net sales for the towel department were $1,150,000. Billed cost of merchandise was $888,000. Shipping charges were $5,460 and the buyer negotiated a discount of 5%. What were the gross margin dollars and percentage for the towel department?

Gross Margin Dollar = $ 262,000

Gross Margin as Profit = $ 262,000/1150,000 * 100 = 22.78

Explanation:

Net sales for the towel department $1,150,000.

Cost of merchandise $888,000.

Gross Profit $262,000

Shipping charges $5,460

Discount 5%. $ 57500

Net Profit $ 199040

Without sufficient gross profit a merchandiser will likely fail.

Gross Margin Dollar = $ 262,000

Gross Margin as Profit = $ 262,000/1150,000 * 100 = 22.78

For every dollar in sales the company has more 22 cents left over to cover the expenses.