When selling iPods for $20 in revenue at a cost of $10, how does it affect gross profit?

When selling iPods for $20 in revenue at a cost of $10, how does it affect gross profit?

• A. It decreases by $10
• B. It remains the same
• C. It increases by $10
• D. It increases by $20

Answer: (C)

Gross profit is calculated by subtracting the cost of goods sold (COGS) from the revenue generated from sales. In this case, if iPods are sold for $20, this amount represents the revenue. The cost to sell these iPods is $10. To determine the gross profit, you would subtract the COGS from the revenue: Gross Profit = Revenue - Cost of Goods Sold Gross Profit = $20 - $10 This results in a gross profit of $10. When you sell iPods at this price, the gross profit clearly increases by $10, as the revenue exceeds the costs directly associated with producing or purchasing the iPods. Therefore, the choice that states gross profit increases by $10 directly reflects this calculation and accurately represents the impact on gross profit when these iPods are sold.

Gross profit is calculated by subtracting the cost of goods sold (COGS) from the revenue generated from sales. In this case, if iPods are sold for $20, this amount represents the revenue. The cost to sell these iPods is $10. To determine the gross profit, you would subtract the COGS from the revenue:

Gross Profit = Revenue - Cost of Goods Sold

Gross Profit = $20 - $10

This results in a gross profit of $10. When you sell iPods at this price, the gross profit clearly increases by $10, as the revenue exceeds the costs directly associated with producing or purchasing the iPods. Therefore, the choice that states gross profit increases by $10 directly reflects this calculation and accurately represents the impact on gross profit when these iPods are sold.