PRINCIPLES OF ACCOUNTS

THE DIFFERENCE BETWEEN THE MARKET VALUE OF GOODS PRODUCED AND THE COST OF PRODUCTION IS

  • A. net profit on goods sold
  • B. gross profit on manufacturing ✓
  • C. closing stock of work-in-progress
  • D. prime cost of manufacturing

 

To calculate the difference between the market value of goods produced and the cost of production, you would look at the gross profit on manufacturing. Gross profit on manufacturing represents the amount left over after deducting the cost of goods sold (COGS) from the total revenue generated by selling those goods. It reflects how efficiently a company is managing its production costs and generating profits from its manufacturing activities.

In essence, gross profit on manufacturing is a key indicator of a company’s profitability in terms of its core manufacturing operations. It helps assess whether a company is effectively controlling its production costs and pricing its products competitively in the market.

Therefore, when comparing the market value of goods produced to the cost of production, focusing on the gross profit on manufacturing provides insights into how much value a company is adding through its manufacturing processes.

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