ITPEC IP April 2022 Question 72
ITPEC IP April 2022 — Question 72 of 100
Operating profit equals gross profit minus selling, general, and administrative expenses. Gross profit is sales less cost of sales. Deducting the ordinary operating expenses required to sell products and administer the business yields the profit generated by core business operations.
Answer (a)
Why not others:
- (b) calculates gross profit
- (c) adjusts current profit for extraordinary gains and losses to obtain profit before tax under the presented structure
- (d) deducts taxes from pre-tax profit to obtain net profit
Key rule: Follow the income statement in stages: sales − cost of sales = gross profit; gross profit − SG&A = operating profit.
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