Question

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

Sales (110 units)		$517,000
Production costs (137 units):
Direct materials	$69,606
Direct labor	17,772
Variable factory overhead	31,100
Fixed factory overhead	29,619	148,097
Operating expenses:
Variable operating expenses	$6,202
Fixed operating expenses	3,708	9,910

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

a. $391,888

b. $516,863

c. $388,180

d. $398,090

Answer 1

Correct answer-------------d. $398,090

Working 1

Sales	$            517,000.00
Less: Cost of goods sold -(Working 2)	$            118,910.00
Gross Profit	$            398,090.00

.Working 2

Material cost	$    69,606.00
Direct labor	$    17,772.00
Variable manufacturing Overheads	$    31,100.00
Fixed Manufacturing Overheads	$    29,619.00
Total cost	$ 148,097.00
Divided by : Units produced	137
Cost per unit	$      1,081.00
Multiplied by: Units sold	110
Cost of goods sold	$ 118,910.00