Answer :
Thompson Corp has a better Gross Profit Rate than Dooley Corp.
To calculate the Gross Profit Rate, we use the formula:
[tex]\[ \text{Gross Profit Rate} = \left( \frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \right) \times 100 \][/tex]
For Dooley Corp:
Net Sales = $500,000
Cost of Goods Sold = $300,000
Gross Profit Rate for Dooley Corp:
[tex]\[ \text{Gross Profit Rate}_{\text{Dooley}} = \left( \frac{500,000 - 300,000}{500,000} \right) \times 100 \][/tex]
[tex]\[ = \left( \frac{200,000}{500,000} \right) \times 100 \][/tex]
[tex]\[ = 0.4 \times 100 \][/tex]
[tex]\[ = 40\% \][/tex]
For Thompson Corp:
Net Sales = $600,000
Cost of Goods Sold = $320,000
Gross Profit Rate for Thompson Corp:
[tex]\[ \text{Gross Profit Rate}_{\text{Thompson}} = \left( \frac{600,000 - 320,000}{600,000} \right) \times 100 \][/tex]
[tex]\[ = \left( \frac{280,000}{600,000} \right) \times 100 \][/tex]
[tex]\[ = 0.4667 \times 100 \][/tex]
[tex]\[ = 46.67\% \][/tex]
Therefore, Thompson Corp has a better Gross Profit Rate of 46.67% compared to Dooley Corp's Gross Profit Rate of 40%.
Complete Question:
Given the following account balances for Dooley Corp and Thompson Corp, which company has a better Gross Profit Rate?
