Question

In: Accounting

A manufacturing company that produces a single product has provided the following data concerning its most...

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling price $ 126
Units in beginning inventory 0
Units produced 2,630
Units sold 2,500
Units in ending inventory 130
Variable costs per unit:
Direct materials $ 49
Direct labor $ 17
Variable manufacturing overhead $ 8
Variable selling and administrative expense $ 9
Fixed costs:
Fixed manufacturing overhead $ 84,160
Fixed selling and administrative expense $ 17,500

The total gross margin for the month under absorption costing is:

Multiple Choice

$96,700

$50,000

$10,000

$107,500

Solutions

Expert Solution

Correct Answer--$50,000

Calculations

Working note 1

Total Fixed Manufacturing Overheads

$    84,160.00

Units Produced

2630

Cost per unit produced

$ 32.00

Fixed cost assigned to goods sold (2500 x 32)

$    80,000.00

Fixed cost assigned to Ending Inventory (130 x 32)

$      4,160.00

Working note 2   Cost of goods sold

Direct material

$ 122,500.00

Direct labor

$    42,500.00

Variable manufacturing overheads

$    20,000.00

Fixed manufacturing overheads

$    80,000.00

Total Cost of Goods sold

$ 265,000.00

Income Statement (Partial)

Absorption costing

Sales

$      315,000.00

Cost of Goods sold

$      265,000.00

Gross profit

$        50,000.00


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