Find the missing values in the income statement. What is the gross profit?
| Income Statement |
|-------------------------------------------------------|
| Sales | $78,000 |
| Returns | $(1,500) |
| Net Sales | $76,500 |
| COGS | $(19,800) |
| Gross Profit | $[?]$ |
| Overhead | $(12,000) |
| Net Income | $
Answer (2)
Calculate Gross Profit by subtracting COGS from Net Sales: Gross Profit = Net Sales - COGS.
Substitute the given values: Gross Profit = $76,500 - $19,800.
Perform the subtraction: Gross Profit = $56,700.
The Gross Profit is $56 , 700 .
Explanation
Analyze the problem and available data We are given an income statement and asked to find the gross profit. The income statement provides the following information:
Sales: $78,000
Returns: $(1,500)
Net Sales: $76,500
COGS (Cost of Goods Sold): $(19,800)
Overhead: $(12,000)
We need to calculate the Gross Profit.
Calculate Gross Profit The formula to calculate Gross Profit is:
Gross Profit = Net Sales - COGS
We are given Net Sales = $76,500 and COGS = $(19,800). Substituting these values into the formula, we get:
Gross Profit = $76,500 - $19,800
Determine the Gross Profit Gross Profit = $76,500 - $19,800 = $56,700
Therefore, the Gross Profit is $56,700.
Calculate Net Income (Optional) Now, let's calculate the Net Income, although it's not explicitly asked for, to complete the income statement. The formula for Net Income is:
Net Income = Gross Profit - Overhead
We have Gross Profit = $56,700 and Overhead = $(12,000). Substituting these values, we get:
Net Income = $56,700 - $12,000 = $44,700
Final Answer The Gross Profit is $56 , 700 .
Examples
Understanding income statements is crucial in business. For example, imagine you're running a small bakery. Knowing your sales, returns, and cost of goods sold helps you calculate your gross profit. This tells you how much money you're making from your products before considering other operating expenses. By analyzing these figures, you can make informed decisions about pricing, production costs, and overall business strategy to ensure profitability and growth.
The Gross Profit is calculated by subtracting the Cost of Goods Sold (COGS) from Net Sales. In this case, Gross Profit is $56,700. This value reflects the earnings from sales after accounting for the costs directly associated with producing the goods sold.
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