Question

A-Rod Fishing Supplies had sales of $2,160,000 and cost of goods sold of $1,550,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,450,000.
What was the firm’s operating profit?

Answer 1

Answer:

The firm’s operating profit is $127,000

Explanation:

The operating profit i an element in the income statement obtained after the deduction of the operating expenses from the gross income. The gross income is the difference between the sales and cost of sales.

As such

Given;

sales = $2,160,000

Cost of goods sold = $1,550,000

Gross income = $2,160,000 - $1,550,000

= $610,000  

Selling and administrative expenses = 10% × $2,160,000 = $216,000

Depreciation  = 6% × $4,450,000 = $267,000

Operating profit = $610,000  - $216,000 - $267,000

= $127,000