In 2010, Lake Would Recognize Realized Gross Profit Of

question 124

Multiple Choice

In 2010, Lake would recognize realized gross profit of:

• A)$ 0.
• B)$300,000.
• C)$310,000.
• D)$700,000.2008 sales: Cost = $450,000; $300,000 collected in each year 2008-2010.$300,000 of cost recovered in 2008, the other $150,000 of cost recovered in 2009, so $150,000 of gross profit recognized in 2009, leaving $300,000 recognized in 2010.2009 sales:
• Cost = $900,000; $500,000 collected in 2009, $400,000 collected in 2010.$500,000 of cost recovered in 2009, the other $400,000 of cost recovered in 2009, so $0 of gross profit recognized in 2010.Total: $300,000 + $0 = $300,000

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Definitions:

Contribution Margin Ratio

The portion of sales revenue left over after variable expenses have been deducted, expressed as a percentage of sales revenue.

Variable Expenses

Costs that vary in direct proportion to changes in an activity level or volume, such as raw materials and direct labor.

Sales

Sales refer to the revenue generated from the exchange of goods or services for money or other assets between a seller and a buyer.

Net Operating Income

The profit generated from a company's regular business operations, excluding expenses like taxes and interest.