The Following Statements Regarding Gross Profit Are True Except

question 244

Multiple Choice

The following statements regarding gross profit are true except:

• A) Gross profit is also called gross margin.
• B) Gross profit less other operating expenses equals income from operations.
• C) Gross profit is not calculated on the multiple-step income statement.
• D) Gross profit must cover all operating expenses to yield a return for the owner(s) of the business.
• E) Gross profit equals net sales less cost of goods sold.

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Definitions:

Underapplied Overhead

The situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to underestimation of product costs.

Job-Order Costing

An accounting method used to track the costs associated with producing a specific job or batch of products.

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, including costs related to utilities, depreciation, and salaries for management.

Adjusted Cost

Adjusted cost refers to the original cost of an asset after adjustments for improvements, depreciation, or amortization, directly affecting its value on the balance sheet.