506 B
506 B
Gross profit = Revenue − Cost of Sales only = $500,000 − $320,000 = $180,000 → B
The trick here is that Other Income is not included in gross profit. It gets added after gross profit is calculated. This is a common exam trap — they give you extra numbers to see if you'll throw them in too early.
The order on the income statement goes:
- Revenue − Cost of Sales = Gross Profit
- Gross Profit + Other Income = subtotal
- Then subtract general expenses to get to net profit