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.