Gomez Company has no beginning and ending inventories,and reports the following data about its only product:
$\begin{array}{ll}
\text { Direct materials used } & \$ 470,000 \
\text { Direct labor } & \$ 180,000 \
\text { Fixed indirect manufacturing } & \$ 130,000 \
\text { Fixed selling and administrative } & \$ 150,000\\text { Variable indirect manufacturing } & \$ 120,000 \
\text { Variable selling and administrative } & \$ 60,000 \
\text { Selling price(per unit) } & \$ 100
\end{array}$
$\begin{array} { l }
\text {Units produced and sold }&30,000 \
\end{array}$

Gomez Company uses the contribution approach to prepare the income statement.What is the operating income?
A) $1,890,000
B) $2,100,000
C) $2,190,000
D) $2,250,000

Question

Gomez Company has no beginning and ending inventories,and reports the following data about its only product:
$\begin{array}{ll}
\text { Direct materials used } & \$ 470,000 \
\text { Direct labor } & \$ 180,000 \
\text { Fixed indirect manufacturing } & \$ 130,000 \
\text { Fixed selling and administrative } & \$ 150,000\\text { Variable indirect manufacturing } & \$ 120,000 \
\text { Variable selling and administrative } & \$ 60,000 \
\text { Selling price(per unit) } & \$ 100
\end{array}$
$\begin{array} { l  }
 \text {Units produced and sold }&30,000 \
\end{array}$

Gomez Company uses the contribution approach to prepare the income statement.What is the operating income?
A) $1,890,000
B) $2,100,000
C) $2,190,000
D) $2,250,000

Quizplus · Accepted Answer

Operating income is calculated as total sales minus total variable costs and total fixed costs. Total sales = 30,000 units * $100 = $3,000,000. Total variable costs = (Direct materials + Direct labor + Variable indirect manufacturing + Variable selling and administrative) = $470,000 + $180,000 + $120,000 + $60,000 = $830,000. Total fixed costs = Fixed indirect manufacturing + Fixed selling and administrative = $130,000 + $150,000 = $280,000. Operating income = $3,000,000 - $830,000 - $280,000 = $1,890,000.

Gomez Company Has No Beginning and Ending Inventories,and Reports the Following