Multiple Choice
Which of the following best describes the total manufacturing cost variance?
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4. Merchandising Operations
Net Sales
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Which of the following formulas correctly computes net income for a merchandiser?
A
Net Sales - Cost of Goods Sold - Operating Expenses
B
Net Sales + Cost of Goods Sold - Operating Expenses
C
Net Sales - Cost of Goods Sold + Operating Expenses
D
Net Sales - Operating Expenses + Cost of Goods Sold
Verified step by step guidance1
Understand the concept of net income: Net income is the profit a company earns after deducting all expenses, including the cost of goods sold (COGS) and operating expenses, from its revenues.
Identify the components of the formula: For a merchandiser, the key components are Net Sales (total revenue from sales after returns, allowances, and discounts), Cost of Goods Sold (the direct cost of producing or purchasing the goods sold), and Operating Expenses (expenses related to running the business, such as rent, utilities, and salaries).
Recall the formula for net income: Net income is calculated as total revenues minus total expenses. For a merchandiser, this translates to Net Sales - Cost of Goods Sold - Operating Expenses.
Analyze the options provided: Compare each option to the correct formula. The correct formula should subtract both Cost of Goods Sold and Operating Expenses from Net Sales.
Select the correct formula: Based on the analysis, the correct formula is 'Net Sales - Cost of Goods Sold - Operating Expenses,' as it aligns with the standard calculation of net income for a merchandiser.
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