Plant accounts—definition of gross earning (gross profit) Gross earning is equal to total income (sales) minus which item?

Introduction / Context:
In chemical plant economics, clarity on gross earning (gross profit) is vital for pricing, cost control, and contribution analysis. Gross earning is the margin available before administrative, selling, R&D, and financing charges are considered.

Given Data / Assumptions:

• Total income refers to net sales (after returns/allowances).
• Total product cost means cost of goods sold (COGS), including direct materials, direct labor, and manufacturing overhead attached to units sold.
• Fixed costs outside manufacturing (e.g., admin) and taxes are not part of COGS.

Concept / Approach:
Gross earning (gross profit) = Sales revenue − Cost of goods sold. It measures how efficiently production converts inputs into saleable output. It precedes operating profit, which further subtracts selling, general, and administrative expenses.

Step-by-Step Solution:

Verification / Alternative check:
Standard income statement structure: Sales → COGS = Gross profit; Gross profit → Operating expenses = Operating profit; then interest and taxes to net profit.

Why Other Options Are Wrong:

• Fixed cost: may include admin/overheads not in COGS; not the definition of gross earning.
• Income tax: applied far below gross profit line.
• None of these: incorrect because “total product cost” is correct.

Common Pitfalls:
Confusing plant fixed costs included in manufacturing overhead (part of COGS) with corporate fixed costs (SG&A). Ensure consistent cost classification.

Final Answer:
total product cost