ACCA Applied Knowledge · Financial Accounting · Analysis of financial statements
Zeta Co reported revenue of $800,000, cost of sales of $520,000 and operating expenses of $140,000. What is Zeta Co's operating profit margin?
The operating profit margin is 17.5%. Operating profit is revenue of $800,000 less cost of sales of $520,000 and operating expenses of $140,000, giving $140,000, which is divided by revenue. Gross margin of 35% ignores operating expenses.
- A17.5%Correct
- B35.0%
- C65.0%
- D27.0%
Explanation
Operating profit = 800,000 - 520,000 - 140,000 = 140,000. Margin = 140,000/800,000 = 17.5%. The 35% option is gross margin (280,000/800,000), which ignores operating expenses.
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