MIE258H1 Lecture : Chapter 05

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Your goals for this merchandising chapter are to learn about: The illustrations in earlier chapters were all based on service businesses like law firms and architects. Service businesses are a large component of an advanced economy. However, a lot of money is also spent in stores or on the internet. Such businesses are generally referred to as merchants, and their goal is to purchase inventory and resell it at a higher price to customers. The most obvious issue is the computation and presentation of an amount called gross profit. gross profit is the difference between sales and cost of goods sold, and is reported on the income statement as an intermediate amount. Observe the income statement for chair depot below. The gross profit number indicates that the company is selling merchandise for more than cost. Of course, the company also incurred other operating expenses; advertising, salaries, and rent.

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