If the gross margin is $2000 and revenue is $5000, the cost of goods sold is _________?
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Answer: B. $3,000
Explanation
Cost of goods sold is calculated by subtracting gross margin from total revenue. Subtracting two thousand dollars from five thousand dollars gives three thousand dollars. This standard accounting relationship links revenue, gross margin, and cost of goods sold. Gross margin represents the difference between total revenue and cost of goods sold. Cost of goods sold measures the direct costs attributable to producing goods sold. Income statements rely on this fundamental calculation to report gross profit accurately.
Retailers and manufacturers monitor cost of goods sold to evaluate inventory profitability. Financial analysts review gross profit margins to compare corporate efficiency across peers. Accurate cost of goods sold figures are essential for corporate tax return preparation. Option A introduces a negative sign incorrectly into the standard calculation. Option C suggests an impossible negative cost of goods sold value for operations. Option D overstates the cost of goods sold due to a major arithmetic error.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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