A merchandising business will earn an income before income taxes of exactly $0 when
A) net sales equals cost of goods sold.
B) operating expenses equal net sales.
C) gross margin equals operating expenses.
D) cost of goods sold equals gross margin.

Question

Quizplus · Accepted Answer

Gross margin represents the difference between net sales and cost of goods sold. Therefore, when gross margin equals operating expenses, the business has not earned any income before income taxes.

A Merchandising Business Will Earn an Income Before Income Taxes