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Question 81: The following information was reported on the income statement of Cannondale in one of...

Question 81: The following information was reported on the income statement of
Cannondale in one of its early years of operation. Sales revenues, $450,000;
Cost of goods sold, $200,000; Selling, general, and administrative, $150,000;
Interest expense, $30,000. Cannondale’s gross profit and operating income
would be: Gross profit Operating income
A. $250,000 $70,000
B. $250,000 $100,000
C. $100,000 $70,000
D. $300,000 $70,000

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Answer #1

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Answer #2

Gross profit is equal to sales revenues minus cost of goods sold, so:

Gross profit = $450,000 - $200,000 = $250,000

Operating income is equal to gross profit minus selling, general, and administrative expenses and interest expense, so:

Operating income = $250,000 - $150,000 - $30,000 = $70,000

Therefore, the answer is (A) $250,000 gross profit and $70,000 operating income.

answered by: Hydra Master
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