Souza Inc, Which Produces and Sells a Single Product, Has

question 131

Multiple Choice

Souza Inc, which produces and sells a single product, has provided its contribution format income statement for October.

-If the company sells 3,500 units,its net operating income should be closest to:

• A) $5,513
• B) $6,300
• C) $300
• D) -$4,700

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Definitions:

Absorption Costing Income Statement

An income statement format that incorporates the full cost of manufacturing a product, including both fixed and variable manufacturing costs, in determining the cost of goods sold.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the efficiency of a company in managing its labor and supplies in the production process.

Cost of Goods Sold

Costs directly linked to the manufacture of goods a company sells, encompassing both materials and labor expenses.

Variable Selling

Costs that fluctuate in direct proportion to changes in sales volume, such as commissions and shipping charges.