A departmental income statement showing gross profit can help management identify problems with both the sales prices and purchase prices of its products.

Question

Quizplus · Accepted Answer

A departmental income statement would show the revenue generated from sales and the cost of goods sold, allowing management to calculate the gross profit margin. By comparing this margin to previous periods or industry standards, they can determine if there are issues with the pricing of their products or if they are paying too much for their inventory.

A Departmental Income Statement Showing Gross Profit Can Help Management