Chapter 21, Problem S21A.22SE

To determine

Gross Profit:

Gross profit is the amount of sales after subtracting the cost of goods sold. Gross Profit is calculated with the help of following formulas:

$\text{Gross Profit = Net sales revenue – Variable cost of goods sold - Fixed Cost of goods sold}$c

Operating Income: Under absorption costing, operating Income is calculated as follows:

$\begin{array}{l}\text{Operating Income = Gross Profit - Variable Selling and Administrative Costs }\\ \text{ - Fixed selling and administrative costs}\end{array}$

To determine:

The Gross Profit and Operating Income using the Absorption Costing method