Gross margin is
A) the excess of gross profit over operating expenses.
B) the excess of sales over the cost of goods sold.
C) also referred to as net profit.
D) the same as contribution margin.

Question

Quizplus · Accepted Answer

Gross margin is calculated by subtracting the cost of goods sold from the total sales revenue. It represents the amount of sales revenue that exceeds the direct costs incurred to produce the goods or services sold. Option A refers to operating margin, which is the excess of gross margin over operating expenses. Option C is incorrect because gross margin is not the same as net profit. Option D is incorrect because contribution margin represents the amount of sales revenue that exceeds the variable costs incurred to produce the goods or services sold.

Gross Margin Is