Which formula represents Merchandise Net Operating Income?

Which formula represents Merchandise Net Operating Income?

• A. Revenue - (Operating Expenses)
• B. Revenue - Cost of Goods
• C. Revenue - (Cost of Goods + Operating Expenses)
• D. Gross Margin

Answer: (C)

Merchandise Net Operating Income shows how profitable the merchandising part of the business is after paying for the goods sold and the ongoing store costs. That means you subtract both the cost of goods sold and the operating expenses from revenue. So the correct form is revenue minus (cost of goods) minus (operating expenses), which is the same as revenue minus (cost of goods + operating expenses). For example, if revenue is 200, cost of goods sold is 120, and operating expenses are 40, the MNOI would be 200 − (120 + 40) = 40. This captures the net result of everyday merchandising operations. The other options don’t fit because one leaves out the cost of goods sold, another leaves out operating expenses, and gross margin only subtracts cost of goods sold, not the operating costs.

Merchandise Net Operating Income shows how profitable the merchandising part of the business is after paying for the goods sold and the ongoing store costs. That means you subtract both the cost of goods sold and the operating expenses from revenue. So the correct form is revenue minus (cost of goods) minus (operating expenses), which is the same as revenue minus (cost of goods + operating expenses).

For example, if revenue is 200, cost of goods sold is 120, and operating expenses are 40, the MNOI would be 200 − (120 + 40) = 40. This captures the net result of everyday merchandising operations.

The other options don’t fit because one leaves out the cost of goods sold, another leaves out operating expenses, and gross margin only subtracts cost of goods sold, not the operating costs.