Which One of the Following Is Correct Formula for Calculating

question 285

Multiple Choice

Which one of the following is correct formula for calculating operating margin?

• A) Net Profit/Net Sales
• B) Net income/Net Sales
• C) Operating income/Net Sales
• D) Operating income/credit sales

---

Definitions:

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, depreciation, and maintenance, not directly tied to production.

Conversion Costs

The sum of labor costs and overhead expenses related to the transformation of materials into finished products.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services and are a significant component of manufacturing costs.