Answer:
Gross profit= $1,100,000
Explanation:
Giving the following information:
Direct materials used $200,000
Direct labor $80,000
Fixed indirect manufacturing $100,000
Fixed selling and administrative $300,000
Variable indirect manufacturing $20,000
Variable selling and administrative $60,000
Selling price(per unit) $150
Units produced and sold 10,000
Under the absorption costing method, the cost of goods sold includes the fixed manufacturing overhead.
The gross profit is calculated as follow:
Gross profit= sales revenue - cost of goods sold
Cost of goods sold= direct material + direct labor + total allocated overhead
COGS= 200,000 + 80,000 + 20,000 + 100,000= 400,000
Gross profit= 10,000*150 - 400,000= 1,100,000
We will determine the income statement:
Sales= 1,500,000
COGS= (400,000)
Gross profit= 1,100,000
Fixed selling and administrative= (300,000)
Variable selling and administrative= (60,000)
Net operating profit= 740,000
Answer: $1,100,000
Explanation:
Direct materials = $200,000
Direct labor = $80,000
Fixed indirect manufacturing overhead= $100,000
Fixed selling and administrative = $300,000
Variable indirect manufacturing = $20,000
Variable selling and administrative cost = $60,000
Selling price(per unit) = $150
Total Units produced and sold = 10,000
Total revenue from sales = selling price(per unit) × total units sold
Total sales revenue =$150×10000 = $1,500,000
Under Absorption costing, fixed cost and variable cost have all be incorporated into the cost of goods.
Therefore, cost of goods sold is given by ;
Direct labor cost +direct material cost + fixed indirect manufacturing overhead + variable indirect manufacturing cost
Therefore,
Gross margin = (sales revenue - cost of goods sold)
Cost of goods sold = $(200,000+80,000+100,000+20,000) = $400,000
Gross margin = $(1,500,000 - 400,000) = $1,100,000
