Question

QUESTION 20 The South Division reported income from operations of $400,000 and total service department charges of $200,000. As a result, a. the gross profit margin was $200,000 b. income from operations before service department charges was $600,000 c. net income was $200,000 d. consolidated net income was $200,000

Answer 1

Answer:

Option (b) is correct.

Explanation:

Given that,

Income from operations = $400,000

Total service department charges = $200,000

The income from operations already takes into account the service department charges which means that it is already deducted. Hence, if we add the total service department charges to the income from operations then we can get the income from operations before service department charges.

So, the income from operations before service department charges is as follows:

= Income from operations + Total service department charges

= $400,000 + $200,000

= $600,000