Which of the Following Is a Correct Definition of Operating

question 152

Multiple Choice

Which of the following is a correct definition of operating income?

• A) Sales minus variable expenses.
• B) Sales minus variable expenses and traceable fixed expenses.
• C) Contribution margin minus traceable and common fixed expenses.
• D) Income before interest and taxes (EBIT).

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Definitions:

Marginal Cost

The variation in the overall cost of production that occurs with an increase of one unit in the quantity produced.

Pollution Abatement

Measures taken to reduce, control, or eliminate pollution from various sources to improve environmental health.

Diminishing Returns

Diminishing returns is an economic principle stating that as one factor of production increases while others are held constant, the additional output (returns) from the increased factor will eventually decrease.

Free Ride

Benefiting from a service or good without having to bear the cost or effort of obtaining it, usually in the context of public goods.