Question

Lucy INC. has the following information on its accounting records: gross profits $175,000; interest expense $25,000; selling, general and administration expenses $70,000; tax expense $12,000; and Sales $325,000.
What is operating income?

		$150,000
		$80,000
		$45,000
		$33,000
		$105,000

Answer 1

Answer)

Calculation of operating income

Operating income = Gross profit – Operating expenses

                                  = Gross Profit – (Interest expense + selling, general and administration expenses)

                                 = $ 175,000 – ($ 25,000 + $ 70,000)

                                = $ 80,000

Therefore operating income of the company is $ 80,000