Which formula calculates operating income?
A) (sales price × units sold) - (unit variable cost × units sold) - fixed cost
B) (sales price × units sold) + (unit variable cost × units sold) + fixed cost
C) (sales price + units sold) - (unit variable cost + units sold) - fixed cost
D) (sales price - units sold) + (unit variable cost - units sold) + fixed cost

Question

Quizplus · Accepted Answer

Operating income is calculated by subtracting all the variable and fixed costs from the total revenue. Therefore, option A is the correct formula. It subtracts unit variable cost and fixed cost from the product of sales price and units sold.

Which Formula Calculates Operating Income