Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $ 146 Units in beginning inventory 0 Units produced 2,470 Units sold 2,040 Units in ending inventory 430 Variable costs per unit: Direct materials $ 50 Direct labor $ 20 Variable manufacturing overhead $ 11 Variable selling and administrative expense $ 19 Fixed costs: Fixed manufacturing overhead $ 69,160 Fixed selling and administrative expense $ 20,400 The total gross margin for the month under absorption costing is:

Answer 1

Answer:

Total gross margin= $75,480

Explanation:

Giving the following information:

Selling price $ 146

Units in beginning inventory 0

Units produced 2,470

Units sold 2,040

Variable costs per unit:

Direct materials $ 50

Direct labor $ 20

Variable manufacturing overhead $ 11

Fixed costs:

Fixed manufacturing overhead $ 69,160

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the unitary production cost:

Unit product cost= direct material + direct labor + total unitary overhead

Unitary fixed overhead= 69,160 / 2,470= $28

Unit product cost= 50 + 20 + (11 + 28)= $109

Now, the gross margin:

Unitary Gross margin= selling price - Unit product cost

Unitary Gross margin= 146 - 109

Unitary Gross margin= $37

Total gross margin= 37*2,040

Total gross margin= $75,480