Table 5-1 $$\begin{array} { | l | r | }
\hline \text { Sales revenue } & \$ 480,000 \
\hline \text { Cost of goods sold } & 300,000 \
\hline \text { Sales discounts } & 20,000 \
\hline \text { Sales retums and allowances } & 15,000 \
\hline \text { Operating expenses } & 85,000 \
\hline \text { Interest revenue } & 5,000 \
\hline
\end{array}$$
-Referring to Table 5-1, what is gross margin?
A)$145,000
B)$105,000
C)$140,000
D)$90,000

Question

Table 5-1 $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 480,000 \
\hline \text { Cost of goods sold } & 300,000 \
\hline \text { Sales discounts } & 20,000 \
\hline \text { Sales retums and allowances } & 15,000 \
\hline \text { Operating expenses } & 85,000 \
\hline \text { Interest revenue } & 5,000 \
\hline
\end{array}$$
-Referring to Table 5-1, what is gross margin?
A)$145,000
B)$105,000
C)$140,000
D)$90,000

Quizplus · Accepted Answer

Gross margin is sales revenue minus cost of goods sold. In this case, gross margin is $480,000 - $300,000 = $180,000. However, sales discounts and sales returns and allowances are also deducted from sales revenue to arrive at net sales. In this case, net sales is $480,000 - $20,000 - $15,000 = $445,000. Gross margin is then net sales minus cost of goods sold, which is $445,000 - $300,000 = $145,000.

Table 5-1 -Referring to Table 5-1, What Is Gross Margin? A)$145,000 B)$105,000

Table 5-1 -Referring to Table 5-1, What Is Gross Margin?
A)$145,000
B)$105,000