Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-How is gross profit calculated?
A) income before taxes less operating expenses
B) revenue less cost of sales
C) profit before taxes less cost of sales
D) operating income less operating expenses

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-How is gross profit calculated?
A) income before taxes less operating expenses
B) revenue less cost of sales
C) profit before taxes less cost of sales
D) operating income less operating expenses

Quizplus · Accepted Answer

Gross profit is calculated by subtracting the cost of sales (or cost of goods sold) from the revenue. It measures how efficiently a company uses its labor and supplies in the production process.

Cost of the Asset$100,000