Financial information is presented below:<\/p>\n\n\n\n
Operating expenses $ 28,000<\/p>\n\n\n\n
Sales returns and allowances 7,000<\/p>\n\n\n\n
Sales discounts 3,000<\/p>\n\n\n\n
Sales revenue 150,000<\/p>\n\n\n\n
Cost of goods sold 98,000<\/p>\n\n\n\n
Gross profit would be<\/p>\n\n\n\n
a. $49,000.
b. $42,000.
c. $45,000.
d. $52,000.<\/p>\n\n\n\n
The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n To find gross profit<\/strong>, we use the formula:<\/p>\n\n\n\n Gross Profit = Net Sales \u2013 Cost of Goods Sold<\/strong><\/p>\n<\/blockquote>\n\n\n\n Let\u2019s break it down using the financial information provided:<\/p>\n\n\n\n Net Sales = Sales Revenue \u2013 Sales Returns and Allowances \u2013 Sales Discounts<\/p>\n\n\n\n Given:<\/p>\n\n\n\n So,<\/p>\n\n\n\n Net Sales = $150,000 \u2013 $7,000 \u2013 $3,000 = $140,000<\/strong><\/p>\n<\/blockquote>\n\n\n\n Now, use the Net Sales to calculate Gross Profit:<\/p>\n\n\n\n Gross Profit = Net Sales \u2013 Cost of Goods Sold b. $42,000<\/strong><\/p>\n\n\n\n Gross profit<\/strong> is a critical financial metric that represents the profit a company makes after deducting the costs associated with producing or purchasing the goods it sells. It does not<\/strong> consider other expenses like operating expenses, taxes, or interest\u2014only direct costs of goods sold (COGS)<\/strong> are deducted from net sales.<\/p>\n\n\n\n To arrive at gross profit, we must first calculate net sales<\/strong>, which represents actual revenue from customers after accounting for any product returns and sales-related discounts. This gives a more accurate measure of revenue than gross sales alone.<\/p>\n\n\n\n In this case, the company had gross sales revenue of $150,000. However, some of those sales were either returned by customers ($7,000) or had discounts applied ($3,000), which reduce the total revenue the company actually retained. Subtracting those amounts gives us net sales of $140,000.<\/p>\n\n\n\n Next, the Cost of Goods Sold (COGS)<\/strong> is subtracted. COGS includes all direct costs associated with making the product, such as raw materials and labor. Here, the COGS is $98,000.<\/p>\n\n\n\n Thus:<\/p>\n\n\n\n It’s important to note that operating expenses<\/strong> like administrative salaries, rent, and utilities (in this case, $28,000) are not<\/strong> included in the gross profit calculation. They are considered in the next stage<\/strong>, when calculating operating profit (EBIT)<\/strong>.<\/p>\n\n\n\n Understanding gross profit helps stakeholders evaluate how efficiently a company produces or sources its goods, a key indicator of financial health.<\/p>\n","protected":false},"excerpt":{"rendered":" Financial information is presented below: Operating expenses $ 28,000 Sales returns and allowances 7,000 Sales discounts 3,000 Sales revenue 150,000 Cost of goods sold 98,000 Gross profit would be a. $49,000.b. $42,000.c. $45,000.d. $52,000. The correct answer and explanation is : To find gross profit, we use the formula: Gross Profit = Net Sales \u2013 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-210633","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210633","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=210633"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210633\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=210633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=210633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=210633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
Step 1: Calculate Net Sales<\/strong><\/h3>\n\n\n\n
\n
\n
Step 2: Subtract Cost of Goods Sold (COGS)<\/strong><\/h3>\n\n\n\n
\n
Gross Profit = $140,000 \u2013 $98,000 = $42,000<\/strong><\/p>\n<\/blockquote>\n\n\n\nFinal Answer:<\/h3>\n\n\n\n
\n\n\n\nExplanation (300+ words):<\/h3>\n\n\n\n
\n