Which of the following equations calculates the operating income?
A) Operating Income = (Price × Units Sold) − (Unit Variable Cost × Units Sold) - Fixed Cost
B) Operating Income = Sales − Fixed Cost
C) Operating Income = (Unit Variable Cost × Units Sold) − Fixed Cost
D) Operating Income = Sales − Total Contribution Margin
E) Operating Income = (Unit Variable Cost × Units Sold) − (Price × Units Sold) + Total Contribution Margin

Question

Quizplus · Accepted Answer

Operating Income is calculated by subtracting the total variable costs and fixed costs from sales revenue. Choice A is the correct equation because it takes into account both the unit variable cost and fixed costs that are subtracted from the revenue generated from units sold.

Which of the Following Equations Calculates the Operating Income