Sales revenue $900,000 cost of goods sold 625,000 sales discounts 30,000 sales returns and allowances 15,000 operating expenses 99,000 interest revenue 6,500 what is the gross profit?

a. $130,000
b. $120,000
c. $230,000
d. $300,000

Correct answer is C, $230,000

Explanation:

Gross profit is the amount we derived after we deduct cost of goods sold to the net sales revenue.

First, we must compute the Net sales revenue.

Sales Revenue                          $900,000

Less:

   Sales discounts                        $30,000

   Sales returns and allowances $15,000

Net Sales                                   $855,000

Next, We deduct cost of goods sold to net sales revenue in order for us to arrive the gross profit of the period.

Net sales                              $855,000

Less

Cost of goods sold               $625,000

GROSS PROFIT MARGIN     $230,000

The gross profit is: C.$230,000.

Explanation:

The gross profit is determined by deducting Cost of good sold from Net sales.

Net Sales is net amount of sales in the period, that is, after taken away Sales Discounts, Sales returns and allowances from Gross Sales. So, we have Net Sales calculated as $900,000 - $30,000 - $15,000 = $855,000.

As a result, Gross profit = Net Sales - Cost of good sold = $855,000 - $625,000 = $230,000.

Operating expenses and Interest revenue is irrelevant in Gross profit determination. These expense item and income item will be taken into account when calculating Net Profit.

Thus, the answer is C.$230,000.

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