Question

Kray Inc., which produces a single product, has provided the following data for its most recent month of operations:

Number of units produced		5,800
Variable costs per unit:
Direct materials	$	34
Direct labor	$	20
Variable manufacturing overhead	$	9
Variable selling and administrative expense	$	4
Fixed costs:
Fixed manufacturing overhead	$	481,400
Fixed selling and administrative expense	$	464,000

There were no beginning or ending inventories. The variable costing unit product cost was:

Multiple Choice

$146 per unit

$63 per unit

$67 per unit

$58 per unit

.

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

Selling price	$	144
Units in beginning inventory		0
Units produced		3,020
Units sold		2,730
Units in ending inventory		290
Variable costs per unit:
Direct materials	$	47
Direct labor	$	21
Variable manufacturing overhead	$	16
Variable selling and administrative expense	$	9
Fixed costs:
Fixed manufacturing overhead	$	90,600
Fixed selling and administrative expense	$	35,490

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

Multiple Choice

$81,900

$21,840

$128,430

$139,230

Answer 1

Answer 1
The variable costing unit product cost
	Per Unit
Direct materials	$34.00
Direct Labour	$20.00
Variable Manufacturing Overhead	$9.00
Unit product cost	$63.00
The answer is $63 per unit.
Answer 2
The absorption costing unit product cost
	Per Unit
Direct materials	$47.00
Direct Labour	$21.00
Variable Manufacturing Overhead	$16.00
Fixed Manufacturing overhead	$30.00
Unit product cost	$114.00
Fixed manufacturing overhead cost per unit = Total Fixed manufacturing overhead cost / Units produced = $90600 / 3020 units = $30 per unit
Calculation of the total gross margin for the month under absorption costing
Sales [2730 units * $144]	$393,120.00
Less : Cost of goods sold [2730 units * $114]	$311,220.00
Gross Margin for the month	$81,900.00
The answer is $81,900