Use This Information to Answer the Following Question If the Income Statement Were Prepared in a Multistep Form,income

question 74

Multiple Choice

Use this information to answer the following question. $\begin{array}{c} \text {Alcorn \& Zeto Company}\\ \text { Income Statement}\\\text {For the Year Ended December 31, 2010}\\\begin{array}{llr} \text { Revenues} &\\ \text {Net sales } &\$103,250\\ \text {Dividend income }& 8,750\\ \text { Total revenues } &&\$112,000\\\text { Costs and expenses } & \\\text { Costs of goods sold } & \$ 30,000\\\text { Selling expenses } & 10,000 \\\text { General and administrative expenses } & 13,750 \\\text { Interest expense } & 6,250 \\ \text { Total costs and expenses } && 60,0000 \\\text { Income before income taxes } && \$ 52,000 \\\text { Income taxes } && 19,500 \\\text { Net income } && \$ 32,500 \\\end{array}\end{array}$
If the income statement were prepared in a multistep form,income from operations would be

• A) $49,500.
• B) $42,000.
• C) $52,000.
• D) $43,250.

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Definitions:

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with the level of activity but having a portion that remains constant.

Variable Cost

Costs that vary directly with the level of production or service activity.

Fixed Cost

Expenses that do not change with the level of production or sales over the short term, such as rent, salaries, and insurance.

Period Cost

An expense that is not directly tied to the production process but rather incurred over a specific time period.