Multiple Choice
When calculating net sales for BRS Corporation, which of the following should be subtracted from total sales to arrive at the correct figure?
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4. Merchandising Operations
Net Sales
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Net sales revenue minus cost of goods sold is:
A
Total revenue
B
Operating income
C
Net income
D
Gross profit
Verified step by step guidance1
Understand the concept of Gross Profit: Gross profit is calculated as net sales revenue 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: Net sales revenue refers to the total revenue generated from sales after deducting any returns, allowances, and discounts. Cost of goods sold (COGS) includes the direct costs of producing the goods sold by the company, such as materials and labor.
Set up the formula for Gross Profit: Gross Profit = Net Sales Revenue - Cost of Goods Sold.
Analyze the options provided: Total revenue refers to the overall income from sales before any deductions. Operating income is calculated after deducting operating expenses from gross profit. Net income is the final profit after all expenses, taxes, and interest are deducted. None of these match the definition of Gross Profit.
Conclude that the correct answer is Gross Profit, as it directly matches the formula and definition provided in step 3.
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