Determine the Dollar Amount of Net Profit for a Venture

question 64

Multiple Choice

Determine the dollar amount of net profit for a venture with the following financial information: revenues = $500,000; return on assets = 20%; and asset turnover = 2.00 times.

• A) $10,000
• B) $25,000
• C) $50,000
• D) $60,000
• E) $75,000

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Definitions:

Fixed Manufacturing Overhead

The portion of manufacturing costs that do not vary with the level of production, such as salaries of supervisors and rent for factory buildings.

Variable Costing

A costing method that includes only variable production costs in the cost of goods sold, excluding fixed manufacturing overhead.

Absorption Costing

A method of product costing that captures all costs associated with manufacturing a product, including overhead expenses.

Variable Production Costs

Variable production costs fluctuate with the level of production output and include expenses like raw materials and labor directly tied to the production process.