If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs.Which of the following is not a correct expression of the profit equation?
A)Operating income = Sales revenue - Total variable costs - Total fixed costs
B)Operating income = Sales revenue - Discretionary costs - Fixed costs
C)Operating income = [(Sales price per unit - Variable cost per unit) × # units sold] - Fixed cost
D)Operating income = [Contribution margin per unit × # units sold] - Fixed costs

Question

Quizplus · Accepted Answer

Discretionary costs are not included in the profit equation as they are not necessary for the production of goods or services, and can be adjusted based on management's discretion. The correct expression of the profit equation includes sales revenue, variable costs, and fixed costs.

If an Organization Wants to Make a Profit, It Must