Which of the following mathematical expressions is true if the net operating income of a firm is equal to zero?
A) Sales = Gross profit margin
B) Sales = Total variable costs + Total fixed costs
C) Total operating costs = Total variable costs + Total fixed costs
D) Total operating costs = Contribution margin
E) Contribution margin = Earnings before interest and tax

Question

Quizplus · Accepted Answer

If the net operating income of a firm is equal to zero, it means that the total revenue equals the total expenses. In other words, the sales revenue should be equal to the sum of variable and fixed costs. Therefore, option B is the correct expression. Option A is not necessarily true as the gross profit margin only considers the cost of goods sold, not all expenses. Option C is not correct as total operating costs also include non-production expenses. Option D is not correct as the contribution margin only covers variable costs. Option E is not correct as earnings before interest and tax also involve other expenses such as depreciation.

Which of the Following Mathematical Expressions Is True If the Net