How would you Calculate Gross Income?

Operating income also takes into account all operating expenses, such as salaries and office expenses. Is the sale of a company considered operating income? IBM was actually criticized for the move, which looked good in the company’s income statement because it reduced the company’s general and administrative expenses for the year. But because the sale was a one-time occurrence, it shouldn’t have counted as operating income. Revenue is the amount of money a company earns before deducting any of its expenses–such as salaries or office supplies. In 2002, IBM reported the profit from the sale of a subsidiary company as operating income.

What is the term used to describe the decrease in value of a company’s equipment over time? Adding another 10,000 units brings sales up to $1,000,000 with $200,000 in operating costs, which works out to $800,000 in operating income–an increase of $400,000. If a corporation is selling picnic baskets for $50, current sales are 10,000 units, and the costs are $10 per unit, how much will the operating income change if sales increase by another 10,000 units? Depreciation is the accounting term that means the reduction in value of assets over time. A company’s facilities or equipment can both depreciate. At the current number of units, the corporation’s operating income will equal $400,000 — $500,000 for sales of the picnic baskets, minus $100,000 in operating costs.

A company’s income statement summarizes that company’s expenses and revenues at a specific moment in time. True or false? Cutting your company’s prices to boost sales will increase your gross profit. Cutting prices isn’t a good business strategy when you’re looking to increase your gross profit. An income statement shows a company’s revenues and expenses over time, not just for one brief period. If you’re selling T-shirts for $10 each, your cost per T-shirt is $2, and you sell 200 shirts, you’re looking at a gross profit of $1,600. If you cut the price of each T-shirt to $5 and then sell 400 — double the number of t-shirts — you’re actually going to lower your gross profit to $1,200.

You’re starting your own business and learning how to make it profitable. Now it’s time to test your knowledge of the two key financial terms you’ll need to run that business: operating income and gross income. In business operations terms, what does COGS stand for? If you owned a sneaker company, which of these would be considered a cost of goods sold (COGS)? The cost of goods sold is considered an operating expense, which is subtracted from a company’s revenue (along with the cost of depreciation) to figure out its operating income.

A high gross profit margin is a sign that a company is producing its goods efficiently, because it still has a lot of profit left over after subtracting the cost of goods sold. What would that same table manufacturer’s operating income be if it makes $500 per table and spends $200 to produce each table, $25 in salaries, and $25 in office expenses? If a table manufacturer’s revenue is $500 per table and it spends $200 to produce each table, as well as $25 in salaries and $25 in office expenses, what is the manufacturer’s gross income? Because gross income equals a company’s profits minus the cost of producing its goods, this table company’s gross income would be $300 per table.