Question

Gross profit for a merchandising company is net sales minus

a) operating expenses
b) cost of goods sold
c) sales discounts
d) cost of goods available for sale

Answer 1

Gross profit for a merchandising company is the net sales minus the cost of goods sold (COGS). It is not reduced by operating expenses, sales discounts, or the cost of goods available for sale.

Step-by-step explanation:

Gross profit for a merchandising company is calculated as net sales minus the cost of goods sold (COGS). This means that to find the gross profit, one would take the company's total revenue from selling goods (net sales) and subtract the direct costs associated with producing or purchasing those goods (COGS). Thus, the correct answer to the question is b) cost of goods sold.

Here's a simple example for illustration: If a company has net sales of $200,000 and the COGS is $85,000, then the accounting profit (also akin to gross profit in this context) would be the difference of $115,000. It is crucial not to confuse gross profit with operating profit or net profit, which are reduced further by operating expenses and other costs or discounts.