A business operated at 100% of capacity during its first month, with the followi
ID: 2478509 • Letter: A
Question
A business operated at 100% of capacity during its first month, with the following results:
Sales (90 units) $90,000
Production costs (100 units):
Direct materials $40,000
Direct labor 20,000
Variable factory overhead 2,000
Fixed factory overhead 7,000 69,000
Operating expenses:
Variable operating expenses $ 8,000
Fixed operating expenses 1,000 9,000
What is the amount of the gross profit that would be reported on the absorption costing income statement? SHOW YOUR WORK PLEASE
Explanation / Answer
Answer: Production cost per unit=(69000/100 units)=$690 per units
Gross Profit=Sales-Cost of goods sold
=90000-(90*690)
=27900
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