Figure 2-7.Gateway Company produces a product with the following per-unit costs:
$\begin{array}{lr}
\text { Direct materials } & \$ 11 \
\text { Direct labor } & 8 \
\text { Overhead } & 15
\end{array}$ Last year, Gateway produced and sold 750 units at a sales price of $68 each. Total selling and administrative expense was $22,000.
-Refer to Figure 2-7. Total operating income last year was?
A) $29,000
B) $51,000
C) $25,500
D) $3,500

Question

Figure 2-7.Gateway Company produces a product with the following per-unit costs:
 $\begin{array}{lr}
\text { Direct materials } & \$ 11 \
\text { Direct labor } & 8 \
\text { Overhead } & 15
\end{array}$ Last year, Gateway produced and sold 750 units at a sales price of $68 each. Total selling and administrative expense was $22,000.
-Refer to Figure 2-7. Total operating income last year was?
A) $29,000
B) $51,000
C) $25,500
D) $3,500

Quizplus · Accepted Answer

Total revenue is 750 units x $68 = $51,000. Total cost per unit is $11 + $8 + $15 = $34. Total cost for 750 units is 750 x $34 = $25,500. Total expenses including selling and administrative are $25,500 + $22,000 = $47,500. Operating income is $51,000 - $47,500 = $3,500.

Figure 2-7 Direct materials $11 Direct labor 8 Overhead 15\begin{array}{lr}\text { Direct materials } & \$ 11 \\\text { Direct labor } & 8 \\\text { Overhead } & 15\end{array} Direct materials Direct labor Overhead ​$11815​

Figure 2-7 $\begin{array}{lr}\text { Direct materials } & \$ 11 \\\text { Direct labor } & 8 \\\text { Overhead } & 15\end{array}$