Sales are $3,640,000 and cost of construction is $2,803,000. What gross profit is reported?
Correct Answer
A) $837,000
Gross profit is sales less cost of construction.
Why This Is the Correct Answer
Gross profit is sales less cost of construction.
Why the Other Options Are Wrong
Option B: $803,000
$803,000 is below the supported result for gross profit dollars; it likely uses the wrong base, period, or account bucket.
Option C: $860,000
$860,000 is above the supported result for gross profit dollars; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $940,000
$940,000 is above the supported result for gross profit dollars; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Sales and less live in different drawers; Reviews Annual tells which opens.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Financial Ratios, Income Account Ratios; use the job ledger figures in the stem and recompute the same accounting measure.
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