Which formula is used to compute gross profit?

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Multiple Choice

Which formula is used to compute gross profit?

Explanation:
Gross profit shows how much money remains from sales after covering the direct cost of producing the goods sold. It excludes operating expenses, taxes, and interest, focusing only on the direct production costs. Therefore the correct formula uses the revenue (sales) amount and subtracts the cost of goods sold. If income is used interchangeably with revenue in this context, subtracting cost of goods sold from income expresses the same idea. The other options mix in operating or all expenses, which would give operating income or net income, not gross profit.

Gross profit shows how much money remains from sales after covering the direct cost of producing the goods sold. It excludes operating expenses, taxes, and interest, focusing only on the direct production costs. Therefore the correct formula uses the revenue (sales) amount and subtracts the cost of goods sold. If income is used interchangeably with revenue in this context, subtracting cost of goods sold from income expresses the same idea. The other options mix in operating or all expenses, which would give operating income or net income, not gross profit.

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