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31 August, 21:10

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?

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  1. 31 August, 22:32
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    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
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