If a company's gross profit margin is 40% and its net sales are $1,000,000, what is its cost of goods sold? Question 20Answer A. $600,000 B. $700,000 C. $400,000 D. $500,000

To find the cost of goods sold (COGS) when you know the gross profit margin and net sales, you can use the following formulas: 1. **Gross Profit Margin** = Gross Profit / Net Sales 2. **Gross Profit** = Net Sales - COGS Given: - Gross profit margin: 40% (or 0.40 as a decimal) - Net sales: $1,000,000 First, calculate the gross profit: \[ \text{Gross Profit} = \text{Gross Profit Margin} \times \text{Net Sales} \] \[ \text{Gross Profit} = 0.40 \times 1,000,000 = 400,000 \] Next, we can find COGS: \[ \text{COGS} = \text{Net Sales} - \text{Gross Profit} \] \[ \text{COGS} = 1,000,000 - 400,000 = 600,000 \] Thus, the cost of goods sold is **$600,000**. The correct answer is **A. $600,000**.