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Tom [10]
3 years ago
10

During its first year of operation Mazer Manufacturing Company produced 2,000 units of inventory and sold 1,800 units. Mazer inc

urred variable product cost of $4 per unit and $2,500 of fixed manufacturing overhead costs. The sales price of the products was $6 per unit. Determine the amount of gross margin Mazer would report if the company uses absorption costing.
Business
1 answer:
Crazy boy [7]3 years ago
5 0

Answer:  The amount of gross margin Mazer would report if the company uses absorption costing is $1350.

Explanation:

Given that,

Mazer Manufacturing Company produced = 2,000 units of inventory

Units Sold = 1,800 units

Variable product cost = $4 per unit

Fixed manufacturing overhead cost =  $2,500

Sales price of the products = $6 per unit

Fixed manufacturing cost per unit = \frac{Total\ cost}{units\ produced}

= \frac{2500}{2000}

= $1.25 per unit

Unit Product cost under Absorption costing = Variable product cost + Fixed manufacturing cost per unit

= 4 + 1.25

= $5.25

∴ Gross margin under Absorption costing = Sales Revenue - Cost of goods sold

= Units sold × sales price - Units sold × Unit Product cost under Absorption costing

= 1800 × 6 - 1800 × 5.25

= 10800 - 9450

= $1350

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Account Titles and Explanation     Debit      Credit

Interest Expense                            $1,152

Interest Payable                                          $1,152

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