Multiple Choice
Which of the following best describes revenue in the context of net sales?
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4. Merchandising Operations
Net Sales
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If a company's chart currently displays Net Sales, which of the following data series should be added to the chart to represent Gross Profit?
A
Net Sales plus Operating Expenses
B
Net Sales minus Operating Income
C
Net Sales plus Cost of Goods Sold
D
Net Sales minus Cost of Goods Sold
Verified step by step guidance1
Understand the concept of Gross Profit: Gross Profit is calculated as Net Sales minus the Cost of Goods Sold (COGS). It represents the profit a company makes after deducting the direct costs associated with producing its goods or services.
Identify the components provided in the problem: The chart currently displays Net Sales, and we need to determine which data series to add to represent Gross Profit.
Recall the formula for Gross Profit: Gross Profit = Net Sales - Cost of Goods Sold. This means we need to subtract the Cost of Goods Sold from Net Sales to calculate Gross Profit.
Analyze the options provided: The correct option must align with the formula for Gross Profit. Among the options, 'Net Sales minus Cost of Goods Sold' matches the formula.
Conclude the reasoning: To represent Gross Profit on the chart, the data series for Cost of Goods Sold should be added and subtracted from Net Sales. This will visually display the Gross Profit.
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