Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
1)Suppose that a company manufactures one single product
1)Suppose that a company manufactures one single product. Annual production capacity is 100 tons. The company manufactured 50 tons and sold 40 tons this year. Relevant data are as follows: (a) Sales: 40.000.000 $, (b) Direct material costs 14.000.000 $, (c) Direct labor 5.000.000 $, (d) Overhead (variable) 4.500.000 $, (e) Overhead (fixed) 8.000.000 $. Find the gross profit margin if the company employs full absorption costing.
- 21,25%
- 68,50%
- 49,60%
- 37,00%
2- Refer to Question 1 above. What would be the unit cost of production had the company employed normal absorption costing?
- 470.000 $
- 550.000 $
- 630.000 $
- 900.000 $
Expert Solution
1. The correct answer is a) 21.25%
Under full absorption costing all the overheads are included as well
Gross profit margin = (Sales: 40.000.000 $- Direct material costs 14.000.000 $ - Direct labor 5.000.000 $ - Overhead (variable) 4.500.000 $ - Overhead (fixed) 8.000.000 $) / Sales: 40.000.000= 21.25%
2. unit cost of production had the company employed normal absorption costing c. 630.000 $
We will add and include the following costs
Direct material costs 14.000.000
$ - Direct labor 5.000.000 $
Overhead (variable) 4.500.000
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
