Given the following notational expressions, which statement is incorrect ? S = S

Question

Given the following notational expressions, which statement is incorrect?

          S = Sales                                           VC = Variable (Operating) Costs

          FOC = Fixed Operating Costs        FFC = Fixed Financing Costs (FC = FOC + FFC)

          T = Tax Rate                                      N = Number of Shares Outstanding

A. 1 - (VC/S) = Gross Margin in Dollars

B. S–VC–FOC = Earnings before Interest and Taxes (EBIT)

C. (S–VC–FC)*T = Tax Amount in Dollars

D. (S–VC–FC) (1–T) / N = Earnings per Share (EPS)

Explanation / Answer

A)

1-VC/S

1-Variable costs/Sales

(Sales-Variable costs)/Sales

Contribution margin/Sales

Contribution margin ratio

Hence, correct option is A. 1 - (VC/S) = Gross Margin in Dollars.

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