Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:Selling price $ 117Units in beginning inventory 0Units produced 2,900Units sold 2,500Units in ending inventory 400Variable costs per unit: Direct materials $ 32Direct labor $ 45Variable manufacturing overhead $ 2Variable selling and administrative expense $ 9Fixed costs: Fixed manufacturing overhead $ 43,500Fixed selling and administrative expense $ 15,000The total gross margin for the month under absorption costing is:____________a) $72,500b) $95,100c) $20,000d) $57,500

Answer 1

Answer:

d) $57,500

Explanation:

For computation of gross margin under absorption costing first we need to find out the unit product cost under absorption costing which is shown below:-

Unit product cost under absorption costing = Direct materials + Direct labor + Variable manufacturing overhead + (Fixed manufacturing overhead ÷ Units produced)

= $32 + $45 + $2 + ($43,500 ÷ 2,900)

= $32 + $45 + $2 + $15

= $94 per unit

Gross margin = Units sold × ( Selling price - Unit product cost under absorption costing)

= 2,500 × ($117 - $94)

= $57,500