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A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $ 110 Units in beginning inventory 0 Units produced 2,400 Units sold 2,100 Units in ending inventory 300 Variable costs per unit: Direct materials $ 41 Direct labor $ 15 Variable manufacturing overhead $ 7 Variable selling and administrative expense $ 9 Fixed costs: Fixed manufacturing overhead $64,800 Fixed selling and administrative expense $ 8,400 The total gross margin for the month under absorption costing is:
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price $ 110 Units in beginning inventory 0 Units produced 2,400 Units sold 2,100 Units in ending inventory 300 Variable costs per unit: Direct materials $ 41 Direct labor $ 15 Variable manufacturing overhead $ 7 Variable selling and administrative expense $ 9 Fixed costs: Fixed manufacturing overhead $64,800 Fixed selling and administrative expense $ 8,400
The total gross margin for the month under absorption costing is:
Expert Solution
| Computation of Gross Margin under Absorption Costing: | |
| Unit product cost under absorption costing | |
| Direct materials | 41 |
| Direct labor | 15 |
| Variable manufacturing overhead | 7 |
| Fixed manufacturing overhead cost | 27 |
| ($64,800/ 2,400) | |
| Absorption costing unit product cost | 90 |
| Absorption Costing Income Statement: | |
| Sales | 2,31,000 |
| ($2,100*$110) | |
| Less: Cost of Goods Sold | 1,89,000 |
| ($2740 * $105) | |
| Gross Margin | 42,000 |
So, total gross margin for the month under absorption costing is $42,000.
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