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About This Drill
AP Business with Personal Finance: Income Statement (Drill 16) is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
Practice reading a single-year income statement: identifying gross profit, calculating margins, tracing a cost-structure change, and selecting the right profitability measure. This drill uses an invented company and original figures.
Passage
Cedar & Pine Furniture Co. builds wooden tables and chairs. Its income statement for last year is shown below, in thousands of dollars.
| Item | Amount |
|---|
| Revenue | 600 |
| Cost of Goods Sold | (390) |
| Gross Profit | 210 |
| Operating Expenses | (120) |
| Operating Profit | 90 |
| Interest and Taxes | (30) |
| Net Profit | 60 |
Questions in This Drill
- Which item on the statement represents the money Cedar & Pine has left after paying the direct costs of producing its furniture, but before any other expenses?
- What was Cedar & Pine's gross profit margin?
- Cedar & Pine's managers expect lumber prices to rise next year. If the company pays more for the wood used to build the furniture it sells, which line on the income statement would increase most directly?
- Which of the following best explains why Cedar & Pine's net profit is lower than its operating profit?
- A lender reviewing this statement wants a single measure of how much profit the business keeps from each dollar of sales after all costs. Which measure best provides that information?