A Company Has Net Sales of $1,500,000,sales Commissions in the Amount

question 164

Multiple Choice

A company has net sales of $1,500,000,sales commissions in the amount of $194,000,net income was $366,400,and the gross profit ratio is 60%,what amount listed as gross profit on the income statement for the period?

• A)$ 563,760
• B)$ 600,000
• C)$ 783,600
• D)$ 900,000
• E)$1,119,840

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overheads) in the price of a product.

Variable Costing

An accounting method that includes all variable production costs (materials, labor, overhead) in product costs but treats fixed overhead expenses as period costs.

Reconciliation

The process of ensuring two sets of records (usually the balances of two accounts) are in agreement.

Variable Costing

A costing method where only variable production costs are included in product costs, with fixed overhead expenses treated as period costs.