ACCA Applied Knowledge · Financial Accounting · Analysis of financial statements
Orion Co has a gross profit margin of 40% and an operating profit margin of 15%. Revenue is $600,000. What are Orion Co's operating expenses (all expenses between gross profit and operating profit)?
Operating expenses are $150,000. Gross profit is 40% of $600,000, which is $240,000, and operating profit is 15% of $600,000, which is $90,000. The difference of $150,000 is the expenses charged between gross profit and operating profit.
- A$150,000Correct
- B$90,000
- C$240,000
- D$330,000
Explanation
Gross profit = 40% x 600,000 = 240,000. Operating profit = 15% x 600,000 = 90,000. Operating expenses = 240,000 - 90,000 = 150,000. The $90,000 option is the operating profit itself.
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