Question

PLEASE HELP!

If a company reported total sales of $59,919, cost of goods sold of $21,112, gross income of $38,807, operating expenses of $18,005 and a gross profit ratio of 65%, what was the company's operating income? (Round to the nearest dollar)

a) -$18,005
b) $20,802
c) $25,225
d) $38,807

Answer 1

b) $20,802

Step-by-step explanation:

Operating income, also called operating profit, is the income after deducting the operating expenses. In other words, it is gross profit minus operating expenses.

Operating expenses exclude taxes and interest.

Operating income will be calculated using the formula.

Gross profit -operating expenses = operating income

i.e,. Revenue- Costs of goods sold -operating expenses = operating income

=$59,919 - $21,112, -$18,005 =operating income

Operating income = $20, 802