The Cost of Goods Sold and the SGA Expenses of an Organization

question 8

Multiple Choice

The cost of goods sold and the SGA expenses of an organization are $60 million and $25 million,respectively.Its other operating expenses amount to $15 million.Determine the total operating income of the organization if it generates sales revenues of $150 million.

• A)$100 million
• B)$90 million
• C)$75 million
• D)$60 million
• E)$50 million

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Definitions:

Cost Of Goods Sold

The total cost directly associated with producing goods sold by a business, including materials and labor.

Perpetual Inventory System

An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale, and the records continuously show the inventory that should be on hand.

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold, thus expenses are based on the oldest costs.

Latest Goods On Hand

Refers to the most recent inventory of products or materials that a company has available for use or sale.