Question

According to the textbook readings, gross margin results from _____________ 1) Subtracting expenses from profit 2) Subtracting expenses from net sales 3) Subtracting cost of goods sold from net sales 4) Subtracting profit from net sales

Answer 1

Answer:

The correct answer is number (3): Subtracting cost of goods sold from net sales.

Explanation:

A Gross Margin is a rough measure of how profitable companies' activities are. This calculates how much the business holds sales revenue after all the direct costs associated with making a product or providing a service. Direct costs are inventory, labor, and expenses related to the manufacturing of a product. Gross Margin is calculated with the following formula:

Gross Margin = Net Sales − COGS

Where:

COGS = Cost of goods sold

Answer 2

Answer:

The answer is 3. Subtracting cost of goods sold from net sales

Explanation:

Gross margin or Gross profit is the profit a business earn after deducting cost associated with making the goods from net sales(Net sales - Cost of goods sold or Cost of sales)

To calculate cost of goods sold - opening inventory/stock plus purchases minus closing inventory/stock.

The attached file also support this statement.