Multiple Choice
Which of the following best explains how the stockturn rate and markups interact to determine profit in a retail business?
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4. Merchandising Operations
Net Sales
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Which of the following best describes how to calculate net sales for a firm in the current year?
A
Net sales = Gross sales - Sales returns and allowances - Sales discounts
B
Net sales = Gross sales + Sales returns and allowances
C
Net sales = Gross sales + Cost of goods sold
D
Net sales = Gross sales - Operating expenses
Verified step by step guidance1
Understand the concept of net sales: Net sales represent the revenue a company earns from its sales after accounting for deductions such as sales returns, allowances, and discounts.
Identify the components of the formula: Gross sales refer to the total revenue from sales before any deductions. Sales returns and allowances are reductions in revenue due to returned goods or price adjustments. Sales discounts are reductions offered to customers for early payment or other reasons.
Recall the correct formula for net sales: Net sales = Gross sales - Sales returns and allowances - Sales discounts.
Analyze the options provided: Compare each option to the correct formula. Eliminate options that include incorrect components, such as adding sales returns or cost of goods sold, or subtracting operating expenses.
Select the correct option: The correct description of how to calculate net sales is the one that matches the formula Net sales = Gross sales - Sales returns and allowances - Sales discounts.
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