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Chapter 21: Q5SE (page 1168)

Calculating gross profit and operating income, absorption costing Calculate the gross profit and operating income for June using absorption costing

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

Short Answer

Expert verified

Answer

Dracut Company鈥檚 gross profit is $317,000 and operating income is $70,000.

Step by step solution

01

Calculation of gross profit using absorption costing

Particulars

Amount

Net sales revenue

$755,000

Less: Cost of goods sold

Variable cost of goods sold

$240,000

Fixed cost of goods sold

$198,000

Gross profit

$317,000

02

Statement showing operating income

Particulars

Amount

Net sales revenue

$755,000

Less: Cost of goods sold

Variable cost of goods sold

$240,000

Fixed cost of goods sold

$198,000

Gross profit

$317,000

Less: Selling and administrative cost

Variable selling and administrative cost

$168,000

Fixed selling and administrative cost

$79,000

Operating Income

$70,000

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Most popular questions from this chapter

Question:What is a business segment? Give some examples.

Question: Computing variable costing operating income Refer to the information for Concord, Inc.

Requirements:

  1. Using variable costing, calculate the unit product cost.
  2. Prepare an income statement using the contribution margin format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Computing unit product cost, variable costing Calculate the unit product cost using variable costing. Round your answer to the nearest cent.

Use the following information for Short Exercises S21-2 and S21-3.

Martin Company had the following costs:

Units produced 320 units Direct materials $ 71 per unit Direct labor 40 per unit Variable manufacturing overhead 13 per unit Fixed manufacturing overhead 7,360 per year Variable selling and administrative costs 22 per unit Fixed selling and administrative costs 1,920 per year

Explain how the sales mix can affect the profitability of a company.

Comparing variable and absorption costing Refer to Exercises E21-16 and E21-17.

Requirements:

  1. Which costing method produces the highest operating income? Explain why.
  2. Which costing method produces the highest April 30 balance in Finished Goods Inventory? Explain why
See all solutions

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