Question

Calculating gross profit and operating income, absorption costing Calculate the gross profit and operating income for June using absorption costing

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

Short answer

Answer

Dracut Company’s gross profit is $317,000 and operating income is $70,000.

Step-by-step solution

Calculation of gross profit using absorption costing

Particulars	Amount
Net sales revenue	$755,000
Less: Cost of goods sold
Variable cost of goods sold	$240,000
Fixed cost of goods sold	$198,000
Gross profit	$317,000

Statement showing operating income

Particulars	Amount
Net sales revenue	$755,000
Less: Cost of goods sold
Variable cost of goods sold	$240,000
Fixed cost of goods sold	$198,000
Gross profit	$317,000
Less: Selling and administrative cost
Variable selling and administrative cost	$168,000
Fixed selling and administrative cost	$79,000
Operating Income	$70,000