The major revenue of a merchandiser is while the major expense(s) is (are) .
A) sales revenue, cost of goods sold
B) gross margin, operating expenses
C) income from operations, cost of goods sold
D) sales revenue, operating expenses
The Correct Answer and Explanation is :
The correct answer is:
A) Sales revenue, cost of goods sold
Explanation:
A merchandiser is a business that earns revenue primarily by selling goods rather than providing services. In accounting, the major revenue and expenses of a merchandiser revolve around the buying and selling of inventory.
Major Revenue – Sales Revenue
The major source of revenue for a merchandising business is sales revenue, which represents the total income generated from selling goods to customers. Sales revenue is recorded when a sale transaction occurs, whether in cash or on credit. It is the top-line figure on an income statement and is critical in determining the business’s profitability.
Major Expense – Cost of Goods Sold (COGS)
The largest expense for a merchandiser is typically the cost of goods sold (COGS). This refers to the direct costs associated with purchasing or producing the goods sold during a period. It includes:
- The purchase price of goods from suppliers
- Freight-in (shipping costs to acquire inventory)
- Import duties and taxes
- Any direct costs necessary to make the product ready for sale
COGS is subtracted from sales revenue to calculate gross profit, which represents how much profit remains after covering the cost of inventory.
Why Not Other Options?
- B (Gross margin, operating expenses): Gross margin (gross profit) is an intermediate figure in the income statement, not the main revenue.
- C (Income from operations, COGS): Income from operations is not a revenue source but a result after deducting operating expenses.
- D (Sales revenue, operating expenses): While operating expenses are significant, the primary cost for a merchandiser is COGS.
Thus, the correct answer remains A) Sales revenue, cost of goods sold.
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