Operating Margin Is Calculated by Dividing a Company's Operating Profit

question 47

True/False

Operating margin is calculated by dividing a company's operating profit by sales revenues.

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Definitions:

Administrative Expense

Expenses incurred in the process of running a company that are not directly tied to a specific product or service, such as salaries of senior executives.

Responsibility Accounting

A system of accountability in which managers are held responsible for those items of revenue and cost—and only those items—over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results.

Significant Variances

Discrepancies between planned and actual figures that are large enough to warrant attention and possibly corrective action by management.

Cost Control

A process of managing and monitoring expenses to keep business operations within a budget.