Direct Operating Margin May Be Used as a Basis for Eliminating

question 54

True/False

Direct operating margin may be used as a basis for eliminating a department.

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Definitions:

Sales Volume

The total number of units of product sold in a particular period.

Contribution Format

An income statement layout that segregates fixed costs from variable costs, thus highlighting the contribution margin.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit but before taxes and interest costs are deducted.

Sold Units

The total number of units of a product that have been sold within a specific time period.