Answer:
Gross Margin = $ 115,000 Contribution Margin= $ 144,500
Explanation:
Nile Castings
Income Statement
Year 2
Sales Revenue $ 270,000
Direct Materials $63,000
Direct Labor $ 33,000
Variable Manufacturing Overheads $ 18,000
Fixed Manufacturing Costs <u> $ 41,000</u>
Gross Margin $ 115,000
Less Marketing & Administrative Costs
Fixed Marketing Costs $ 38,000
Variable Marketing Costs <u> $ 11,500</u>
<u>Net Profit $ 65,500</u>
Nile Castings
Income Statement Under Absorption Method
Year 2
Sales Revenue $ 270,000
Direct Materials $63,000
Direct Labor $ 33,000
Variable Manufacturing Overheads $ 18,000
Variable Marketing & Administrative Costs <u> $ 11,500</u>
Contribution Margin $ 144,500
Less Fixed Costs
Fixed Manufacturing Costs $ 41,000
Fixed Marketing Coss <u> $ 38,000</u>
<u>Net Profit $ 65,500</u>
