On the income statement, operating profit is defined as:

Question

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Operating profit is calculated by subtracting selling, general, and administrative expense and depreciation operating expenses from gross profit. Option B is the only one that correctly includes both the gross profit and operating expenses in the calculation. Option A only subtracts operating expenses, not including depreciation. Option C only subtracts the cost of goods sold, not including operating expenses, and option D only subtracts operating expenses, not including depreciation or cost of goods sold. Therefore, option B is the best choice.

On the Income Statement, Operating Profit Is Defined As