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The Allen Company Had the Following Income Statement for the Month

question 67

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The Allen Company had the following income statement for the month of July:  Allen Company Income Statement For the Month of July Sales ($60×10,000) $600,000 Cost of goods sold:  Direct materials ($12×10,000) $120,000 Direct labour ($9×10,000) 90,000 Variable factory overhead ($7.50×10,000) 75,000 Fixed factory overhead 120,000405,000 Gross profit $195,000 Selling and administrative expenses:  Variable ($1.50×10,000) $15,000 Fixed 90,000105,000 Operating income $90,000\begin{array}{c}\text { Allen Company}\\\text { Income Statement}\\\text { For the Month of July}\\\\\begin{array}{lrr}\text { Sales }(\$ 60 \times 10,000) & & \$ 600,000 \\\text { Cost of goods sold: } & & \\\text { Direct materials }(\$ 12 \times 10,000) & \$ 120,000 \\\text { Direct labour }(\$ 9 \times 10,000) & 90,000 & \\\text { Variable factory overhead }(\$ 7.50 \times 10,000) & 75,000 \\\text { Fixed factory overhead } & \underline{120,000} & \underline{405,000} \\\text { Gross profit } & & \$ 195,000 \\\text { Selling and administrative expenses: } \\\text { Variable }(\$ 1.50 \times 10,000) & \$ 15,000 & \\\text { Fixed }& \underline{90,000} & \underline{105,000} \\\text { Operating income }& & \$ 90,000\end{array}\end{array}
-What is the sales volume required to earn a profit of $9,000?


Definitions:

Percentage-Of-Completion Method

An accounting technique used in long-term contracts, recognizing revenue and expenses based on the project's estimated completion level.

Revenue

The total income generated from normal business operations and before any costs or expenses are deducted.

Progress Payments

Payments made on a contract in advance of the final delivery, typically based on the completion of certain stages or milestones within the project.

Critical Event

A significant occurrence or turning point that has the potential to affect the operation, stability, or outcome of a process, project, or situation.

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