Question

McQueen, Inc. buys premium ice cream at a cost of $3.75 a gallon and sells it for $8.50 a gallon. Selling, general, and administrative expenses are $1.65 per gallon. Which of the following statements is correct? Multiple Choice o The difference between the selling price and the cost is recorded in the gross profit account. o Gross profit per gallon is $3.10. o Gross profit per gallon is $4.75. o The difference between the selling price and the cost is recorded in the Net Profit account.

Answer 1

Correct answer---------Gross profit per gallon is $4.75

Working

The difference between selling price and cost is net profit per unit. Total of sales minus all expenses are recorded as net profit.

Sales price per gallon	$             8.50
Cost of goods sold per gallon	$             3.75
Gross profit per gallon	$             4.75