Gross Profit margin under Absorption costing: Under Absorption costing, the Unit product cost is computed on the fact that all the product cost including the fixed manufacturing cost shall be the part of unit product cost and will be used in the valuation of ending inventory of finished goods. Therefore, the proportionate fixed manufacturing cost is deducted from the sales revenue while computing the gross profit and remaining proportionate fixed product cost become part of ending inventory valuation . The Gross margin under absorption costing is computed by computing the excess of sales revenue over the total product cost of the business including the proportionate fixed manufacturing cost of the business. Then after computing the gross profit, the total selling and other administrative expense shall be deducted for the period to arrive at the amount of net operating income. Gross profit under Absorption costing under various production and sales levels.

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Chapter 21, Problem S21A.23SE

To determine

Gross Profit margin under Absorption costing:

Under Absorption costing, the Unit product cost is computed on the fact that all the product cost including the fixed manufacturing cost shall be the part of unit product cost and will be used in the valuation of ending inventory of finished goods. Therefore, the proportionate fixed manufacturing cost is deducted from the sales revenue while computing the gross profit and remaining proportionate fixed product cost become part of ending inventory valuation.

The Gross margin under absorption costing is computed by computing the excess of sales revenue over the total product cost of the business including the proportionate fixed manufacturing cost of the business.

Then after computing the gross profit, the total selling and other administrative expense shall be deducted for the period to arrive at the amount of net operating income.

Gross profit under Absorption costing under various production and sales levels.

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On January 1, 2023, Barber Corporation paid $1,160,000 to acquire Thompson Company. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2023: Book Value Fair Value Current assets $ 130,000 $ 130,000 Land 75,000 193,000 Building (twenty-year life) 250,000 276,000 Equipment (ten-year life) 540,000 518,000 Current liabilities 26,000 26,000 Long-term liabilities 124,000 124,000 Common stock 233,000 Additional paid-in capital 389,000 Retained earnings 223,000 Thompson earned net income for 2023 of $134,000 and paid dividends of $51,000 during the year. If Barber Corporation had net income of $468,000 in 2023, exclusive of the investment, what is the amount of consolidated net income?

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General Accounting