A business operated at 100% of capacity during its first month, with the following results:Sales (97 units) $455,900Production costs (121 units): Direct materials$61,476 Direct labor15,696 Variable factory overhead27,468 Fixed factory overhead26,161130,801 Operating expenses: Variable operating expenses$5,967 Fixed operating expenses4,64310,610The amount of gross profit that would be reported on the absorption costing income statement isa.$345,076b.$455,779c.$351,042d.$340,433

Answered: A business operated at 100% of capacity…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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

Sales (97 units)		$455,900
Production costs (121 units):
Direct materials	$61,476
Direct labor	15,696
Variable factory overhead	27,468
Fixed factory overhead	26,161	130,801

Operating expenses:
Variable operating expenses	$5,967
Fixed operating expenses	4,643	10,610

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

a.$345,076

b.$455,779

c.$351,042

d.$340,433

Expert Solution

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Gross profit is the amount of profit earned by the an entity after deducting the costs of making the goods from the sales revenue. It is reported on the income statement of the entity.

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