Question

Income from operations is gross profit

a. less operating expenses.

b. less inventory.

c. less cost of goods sold.

d. plus cost of goods sold.

Answer 1

The answer is a. less operating expenses

Income from Operations = Gross Profit - operating expenses

Gross Profit is calculated by substracting all the direct expenses of producing its products from sales revenue.

Direct expenses include - Direct Materials, Direct Labour, shipping costs involved in production facility.

However, operating income or income from operations is calculated after deducting all operating expenses i.e., the costs of running the daily business from gross profit. Operating expenses includes selling expenses, general expenses and administrative expenses, depreciation/amortization costs.