Gross profit rate is computed by dividing cost of goods sold by net sales.

Gross Profit Rate

A financial metric that indicates the percentage of revenue that exceeds the cost of goods sold.

Cost Of Goods Sold

Expenses explicitly tied to the production of a company's sold goods, comprising costs of materials and labor.

Net Sales

Total sales revenue minus returns, allowances, and discounts, representing the actual revenue earned from sales.

Gain an understanding of the critical role and computation of gross profit in the context of merchandising operations.

Verified Answer

Final Answer :

False

Explanation :

Gross profit rate is computed by dividing gross profit by net sales, not cost of goods sold by net sales.

Learning Objectives

Gain an understanding of the critical role and computation of gross profit in the context of merchandising operations.