Question

Risser Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated jointer. Additional information is provided below for the most recent month:
Estimates at the beginning of the month:
Estimated total fixed manufacturing overhead $16,244
Capacity of the jointer 310 hours
Actual results:
Sales $ 66,300
Direct materials $ 15,900
Direct labor $ 14,430
Actual total fixed manufacturing overhead $ 16,244
Selling and administrative expense $ 9,500
Actual hours of jointer use 260 hours
The gross margin that would be reported on the income statement prepared for internal management purposes would be closest to:_____________

Answer 1

Answer:

Gross margin $22,346

Explanation:

The computation of the gross margin is shown below:

Sales             $66,300

less:

Direct material  $15,900

Direct labor   $14,430

Overhead $13,624 ($16,244 ÷ 310× 260)

Gross margin $22,346

Hence, the gross margin is $22,346