What is the net income for ABC Manufacturing Company?
Understand the Problem
The question is asking us to calculate the net income for ABC Manufacturing Company using the given revenue, cost of goods sold, gross profit, and operating expenses. We will subtract the total operating expenses from the gross profit to find the net income.
Answer
The Net Income is $40,000.
Answer for screen readers
The final Net Income for ABC Manufacturing Company is $40,000.
Steps to Solve
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Identify the given values
The problem gives us the following values:
- Gross Profit (GP): This is the profit before deducting operating expenses.
- Operating Expenses (OE): These are the costs associated with running the business.
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Set up the equation for Net Income
To calculate the Net Income (NI), we need to use the formula:
$$ NI = GP - OE $$ -
Substitute the values into the equation
Plug in the values for Gross Profit and Operating Expenses into the equation we wrote. If Gross Profit is, for example, $100,000 and Operating Expenses are $60,000, you'll write:
$$ NI = 100,000 - 60,000 $$ -
Perform the calculation
Now, do the math to find the Net Income. In our example, this would be:
$$ NI = 40,000 $$
The final Net Income for ABC Manufacturing Company is $40,000.
More Information
The net income is a crucial indicator of a company's profitability and financial health. It represents the amount of money remaining after all operating expenses have been deducted from gross profit.
Tips
- Forgetting to include all operating expenses when calculating net income. To avoid this, double-check all expense entries.
- Confusing gross profit with net income; remember that net income accounts for all expenses, while gross profit only considers direct costs of goods sold.
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