On an absorption costing income statement, which of the following correctly determines gross margin?

Question

Quizplus · Accepted Answer

Gross margin is calculated as revenue minus the cost of goods sold, which includes direct materials, direct labor, and manufacturing overhead. Option A subtracts fixed marketing and sales costs, which are not included in cost of goods sold. Option B subtracts variable marketing and sales costs, which might vary depending on sales volume and are not necessarily part of cost of goods sold. Option D only subtracts direct materials and direct labor costs, which do not necessarily represent the full cost of production. Therefore, option C is the correct choice as it accurately represents the formula for calculating gross margin on an absorption costing income statement.

On an Absorption Costing Income Statement, Which of the Following