Question

Tropic zone corporation experienced the following variances: materials price $390 u, materials quantity $1,900 f, labor price $900 f, labor quantity $560 f, and overhead $1,340 u. sales revenue was $103,200, and cost of goods sold (at standard) was $57,800. Determine the actual gross profit.

Answer 1

To determine the actual gross profit, subtract the cost of goods sold from the sales revenue. In this case, the actual gross profit for Tropic Zone Corporation is $45,130.

Step-by-step explanation:

To determine the actual gross profit for Tropic Zone Corporation, we need to subtract the cost of goods sold from the sales revenue. The cost of goods sold is calculated by adding up the standard costs for materials, labor, and overhead, and then adjusting for the variances. In this case, the variances are materials price ($390 unfavorable), materials quantity ($1,900 favorable), labor price ($900 favorable), labor quantity ($560 favorable), and overhead ($1,340 unfavorable).

Standard cost of goods sold = standard materials cost + standard labor cost + standard overhead cost

Actual cost of goods sold = standard cost of goods sold + variances

Gross profit = sales revenue - actual cost of goods sold

Let's calculate:

1. Standard cost of goods sold = $57,800
2. Actual cost of goods sold = $57,800 + ($390 - $1,900 + $900 - $560 + $1,340) = $58,070
3. Gross profit = $103,200 - $58,070 = $45,130

Therefore, the actual gross profit for Tropic Zone Corporation is $45,130.