Question

Place the following items in the order in which sales dollars are applied on a CM income statement?

1) Gross Sales
2) Sales Returns and Allowances
3) Net Sales
4) Cost of Goods Sold
5) Gross Profit
6) Operating Expenses
7) Operating Income

Answer 1

On a CM income statement, the order of sales dollars is Gross Sales, Sales Returns and Allowances, Net Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, and Operating Income.

Step-by-step explanation:

The order in which sales dollars are applied on a CM income statement is as follows:

1. Gross Sales: This represents the total amount of sales made by a company before any deductions.
2. Sales Returns and Allowances: This is the amount deducted from gross sales due to returns or allowances granted to customers.
3. Net Sales: This is the result of subtracting sales returns and allowances from gross sales.
4. Cost of Goods Sold: This represents the cost of producing or purchasing the goods sold.
5. Gross Profit: This is calculated by subtracting the cost of goods sold from net sales.
6. Operating Expenses: These are the expenses incurred in the day-to-day operations of the business, such as salaries, rent, and utilities.
7. Operating Income: This is the result of subtracting operating expenses from gross profit.