Question

A business operated at 100% of capacity during its first month, with the following results: Sales...

A business operated at 100% of capacity during its first month, with the following results:

Sales (114 units) $661,200
Production costs (143 units):
   Direct materials $89,658
   Direct labor 22,891
   Variable factory overhead 40,060
   Fixed factory overhead 38,153 190,762
Operating expenses:
   Variable operating expenses $5,927
   Fixed operating expenses 3,505 9,432

The amount of gross profit that would be reported on the absorption costing income statement is

a.$499,692

b.$661,057

c.$503,197

d.$509,124

Business   Accounting   
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Answer #1

Solution: The Answer is d.$509,124

Working:

Absorption Costing Income Statement
Sales Revenue $         661,200
Less: COGS
Direct Materials [89658/143*114] $             71,476
Direct Labor [22891/143*114] $             18,249
Variable factory overhead [40060/143*114] $             31,936
fixed factory overhead [38153/143*114] $             30,416
Cost of goods sold $         152,076
Gross Profit $         509,124
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