Asked by Jackson Willis on Jun 10, 2024
Verified
The amount of gross profit that would be reported on the absorption costing income statement is
A) $21,000
B) $18,900
C) $27,900
D) $18,000
Gross Profit
The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
Absorption Costing
A pricing strategy that encompasses all expenses associated with production, including direct materials, direct labor, as well as both variable and fixed overhead costs, in the product's price.
- Absorb the foundational principles of absorption costing and its effects on accounting statements.
- Assess the consequence of changes in sales and production on the valuation of inventory and the income from operations.
Verified Answer
DT
Daniel tarcaJun 11, 2024
Final Answer :
C
Explanation :
Gross profit under absorption costing includes all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) as part of the cost of goods sold. The correct amount must account for all these costs in determining the gross profit from the sale of goods.
Learning Objectives
- Absorb the foundational principles of absorption costing and its effects on accounting statements.
- Assess the consequence of changes in sales and production on the valuation of inventory and the income from operations.
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