How does the cost of goods sold affect the gross profit as calculated

QUESTION

How does the cost of goods sold affect the gross profit as calculated in an income statement?

A) It helps to predict what future profits will be.
B) It increases the gross profits.
C) It is figured into operating expenses.
D) It does not affect the gross profits.
E) It is subtracted from net sales revenue.

ANSWER

Answer: E
Explanation: E) Gross profit is the total sales after the cost of goods sold have been accounted for. Cost of goods sold is therefore subtracted from net sales revenue to arrive at the gross profit.