Question

If total operating revenues are $20,000 and the operating margin is 10%, what is the amount of operating income? Clue: Make use of the operating margin formula then solve the unknown (operating income) using Algebra.

Answer 1

Answer:

$2,000

Explanation:

The operating margin is a ratio of the operating income to the operating revenue.

It shows what percentage of the revenue translate into income for the company.

Hence, where the operating margin is y,

10% = y/$20000

y = 10% × $20000

y = $2,000

The amount of operating income is $2,000