Gomez Company has no beginning and ending inventories, and reports the following

Question

Gomez Company has no beginning and ending inventories, and reports the following data about its only product:

Direct materials used                                             $470,000

Direct labor                                                                $180,000

Fixed indirect manufacturing                              $130,000

Fixed selling and administrative                        $150,000

Variable indirect manufacturing                        $120,000

Variable selling and administrative                    $60,000

Selling price(per unit)                                                     $100

Units produced and sold                                           30,000

Gomez Company uses the contribution approach to prepare the income statement. What is the operating income?

A) $1,890,000

B) $2,100,000

C) $2,190,000

D) $2,250,000

Explanation / Answer

1) Answer (A) $1,890,000

Calculation :

Operating income = Sales - All expenses other than non operating expenses

= $3,000,000 - ($470,000 + $180,000 + $130,000 + $150,000 + $120,000 + $60,000)

= $1,890,000

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