Which of the following defines the revenue earned by a department after deducting its cost of merchandise sold and direct expenses?

The term that defines the revenue earned by a department after deducting its cost of merchandise sold and direct expenses is known as departmental margin. This metric is crucial for understanding the profitability of a specific department within an organization because it reflects how much revenue is left after covering the direct costs associated with generating that revenue.

Departmental margin provides insights into the performance of individual departments, allowing management to assess which areas are contributing positively to the overall financial health of the business and which may need improvement. By focusing on both sales and the direct costs associated with those sales, the departmental margin serves as an important indicator of efficiency and profitability.

In contrast, net profit refers to the total income of a business after all expenses have been deducted, not just those related to a specific department, and thus is broader than departmental margin. Gross revenue pertains to total sales before deducting any cost of goods sold or expenses. Operating income is a broader measure that encompasses revenues minus all operating expenses but does not isolate the effects of direct costs tied specifically to a department.

Understanding departmental margin is essential for managers as it helps them make informed decisions about inventory management, pricing strategies, and resource allocation within their respective departments.