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What does the cost of goods sold and gross profit mean

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Question - Word has gotten around that you know accounting and can explain it well. Jim, another of your friends has a unique business. During the summer he buys hats that cost $5.00 each and sells them at the beach for $12.00 each. Other than the cost of the hat, his only other expense last summer was $120 for parking. He sold 78 hats last summer. His accountant prepared a financial statement for him and he has several questions about the income statement. He asks:

-What does the cost of goods sold and gross profit mean?

-Why does the income statement indicate gross profit. Is that info I need to pay attention to? 

-What is the difference between gross profit and net income?

Reference no: EM132943394

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