Calculate COGS and apply 20% markup to find revenue

Steps:

• Compute Cost of Goods Sold (COGS): Beginning inventory + Purchases - Ending inventory = $7,000 +$35,000 - $2,000 =$40,000.
• Markup is 20% on cost, so selling price multiplier is 1.20.
• Revenue = COGS × 1.20 = $40,000 × 1.20 =$48,000.
• This assumes all goods sold at marked-up price, yielding total sales revenue.

Why D is correct:

• Revenue equals COGS with 20% markup on cost, per standard pricing formula: SP = Cost × (1 + Markup %).

Why the others are wrong:

• A: Ignores inventory change and full markup, understating COGS and revenue.
• B: Equals COGS only, omitting the 20% markup to reach selling price.
• C: Applies markup to purchases alone ($35,000 × 1.20), ignoring inventory adjustment.

Final answer: D