Where Are Selling and Administrative Expenses Found on the Multiple-Step

question 143

Multiple Choice

Where are selling and administrative expenses found on the multiple-step income statement?

• A) before gross profit
• B) after sales and before gross profit
• C) after net income before expenses
• D) after gross profit

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Definitions:

Profit

The financial gain realized when the amount of revenue gained exceeds the expenses, costs, and taxes needed to sustain the operation.

Factory Overhead

Factory overhead encompasses all indirect costs associated with manufacturing, such as utilities, maintenance, and management salaries, not directly tied to the production of goods.

Machine Hours

A measure of the total time that a machine or set of machines has been operating, often used to allocate factory overhead costs.

Underapplied

In costing, this term refers to a situation where the overhead allocated to products or services is less than the actual overhead incurred.