Question

A company had sales of 695,000 and cost of goods sold of278,000. Its gross margin equals:

1) $973,000
2) $278,000
3) $417,000
4) $695,000
5) $(417,000)

Answer 1

To calculate the gross margin, subtract the cost of goods sold ($278,000) from the sales ($695,000), which equals $417,000. The correct answer is option 3) $417,000.

Step-by-step explanation:

The student has asked how to calculate the gross margin of a company with sales of $695,000 and cost of goods sold of $278,000. Gross margin is calculated by subtracting the cost of goods sold from the sales. In this case, the gross margin would be:

• Sales: $695,000
• Cost of Goods Sold (COGS): $278,000
• Gross Margin: Sales - COGS = $695,000 - $278,000

Gross Margin = $417,000

Therefore, the correct answer is option 3) $417,000. This represents the amount remaining after the cost to produce the goods sold has been subtracted from the sales revenue, before any other expenses are taken into account.