Operating Profit Excludes Each of the Following, Except

question 37

Multiple Choice

Operating profit excludes each of the following, except:

• A) Interest expense.
• B) Income taxes.
• C) Depreciation.
• D) Prepaid expenses.

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Definitions:

Shortage Costs

Expenses incurred from not having enough inventory on hand, including lost sales, backorder processing, and dissatisfied customers.

Carrying Costs

Expenses associated with holding or storing inventory, including insurance, storage, depreciation, and opportunity costs.

Seasonal Increases

Periodic rises in business activity or demand that occur at the same time each year due to changes in season.

Accounts Receivable Period

The accounts receivable period is the average number of days it takes a company to collect payments owed by its customers.