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ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting

A company reports sales of $840,000, cost of sales of $504,000 and operating expenses of $210,000. What is its operating profit margin?

The operating profit margin is 15%. Operating profit is sales of $840,000 less cost of sales of $504,000 and operating expenses of $210,000, giving $126,000, which is 15% of sales. The 40% figure is only the gross profit margin.

  1. A15%Correct
  2. B25%
  3. C40%
  4. D60%

Explanation

Operating profit = 840,000 - 504,000 - 210,000 = 126,000. Margin = 126,000 / 840,000 = 15%. The 40% option is the gross margin, which ignores operating expenses.

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