Which of the following costs would not be subtracted from Revenue to calculate Gross Profit on an Absorption Income Statement?
A) Direct Materials costs
B) Direct Labor Wages
C) Sales commissions
D) Variable Manufacturing Overhead
E) All of the above would be subtracted

Question

Quizplus · Accepted Answer

Sales commissions are considered selling expenses, not part of the cost of goods sold. Gross profit is calculated by subtracting the cost of goods sold (which includes direct materials, direct labor, and manufacturing overhead) from revenue. Sales commissions are subtracted later when calculating operating income, not gross profit.

Which of the Following Costs Would Not Be Subtracted from Revenue