What Is the Formula to Calculate Operating Income

question 134

Multiple Choice

What is the formula to calculate operating income?

• A)(price × units sold) − (unit variable cost × units sold) − fixed cost
• B)(price × units sold) + (unit variable cost × units sold) + fixed cost
• C)(price + units sold) − (unit variable cost + units sold) − fixed cost
• D)(price − units sold) + (unit variable cost − units sold) + fixed cost

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Definitions:

Initial Cost

The initial expenditure required to acquire an asset or to start a project, incorporating all necessary expenses to bring it to a usable state.

Net Present Value

This signifies the net difference in present value terms of cash received versus cash paid out over an outlined time interval.

Internal Rate of Return

The discount rate at which the net present value of all cash flows (both positive and negative) from a project or investment equals zero.

Decision Rule

A guideline or criterion that aids in making choices between alternative courses of action.