Question: A merchandiser will earn an operating income of exactly $0 when?

When Gross profit equals operating expenses a merchandiser will earn an operating income of?

A merchandiser will earn an operating income of exactly $0 when A) gross profit equals operating expenses.

What is the operating cycle of a merchandiser?

Merchandising companies resell goods to consumers. Their operating cycle begins with cash-on-hand, purchasing inventory, selling merchandise, and collecting customer payments.

What is operating income formula?

Operating income = Gross Profit – Operating Expenses – Depreciation – Amortization. OR. 3. Operating income = Net Earnings + Interest Expense + Taxes.

Which of the following is a component of the operating cycle of a merchandising company?

In a merchandising company, the operating cycle consists of the following transactions: (1) purchases of merchandise, (2) sale of the merchandise – often on account, and (3) collection of accounts receivable from customers.

What are the two categories of expenses in merchandising companies?

Unlike expenses for a service company, expenses for a merchandising company are divided into two categories:

• Cost of goods sold – the total cost of merchandise sold during the period.
• Operating expenses – selling and administrative expenses.

What is one disadvantage of the perpetual inventory system?

One disadvantage of a perpetual inventory system involves the setup cost. Most systems require the purchase of new equipment and inventory software. Scanners are also required when items are received into inventory. Perpetual inventory systems also add to labor costs since all inventory must be entered into the system.

How does a merchandiser determine gross profit?

Cost of goods sold is the major expense in merchandising companies and represents what the seller paid for the inventory it has sold. Gross margin or gross profit is the net sales – cost of goods sold and represents the amount we charge customers above what we paid for the items.

What is the meaning of merchandising?

Merchandising is the promotion of goods and/or services that are available for retail sale. Merchandising includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons.

What is the primary difference between a merchandiser compared to a service provider?

Key Takeaways

A merchandising company engages in the purchase and resale of tangible goods. Service companies primarily sell services rather than tangible goods. Income statements for each type of firm vary in several ways, such as the types of gains and losses experienced, cost of goods sold, and net revenue.

What are the examples of operating income?

How to Calculate Operating Income. Operating expenses include selling, general, and administrative expense (SG&A), depreciation, and amortization, and other operating expenses. Operating income excludes items such as investments in other firms (non-operating income), taxes, and interest expenses.

What is difference between net income and operating income?

Operating income is revenue less any operating expenses, while net income is operating income less any other non-operating expenses, such as interest and taxes. Net income (also called the bottom line) can include additional income like interest income or the sale of assets.

How do you calculate operating costs?

From a company’s income statement take the total cost of goods sold, which can also be called cost of sales. Find total operating expenses, which should be farther down the income statement. Add total operating expenses and cost of goods sold or COGS to arrive at the total operating costs for the period.

What is the major difference between a periodic and perpetual inventory system?

The primary difference between the periodic and perpetual inventory systems is: The perpetual system maintains a continual record of inventory transactions, whereas the periodic system records these transactions only at the end of the period.

Which inventory system determines the cost of goods sold each time a sale occurs?

In a perpetual inventory system, a company determines the cost of goods sold each time a sale occurs.

What type of accounts are sales returns and allowances and sales discounts?

Definition of Sales Discounts

Sales discounts (along with sales returns and allowances) are deducted from gross sales to arrive at the company’s net sales. Hence, the general ledger account Sales Discounts is a contra revenue account.