Question

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

Selling price	$	140
Units in beginning inventory		0
Units produced		3,150
Units sold		2,760
Units in ending inventory		390
Variable costs per unit:
Direct materials	$	47
Direct labor	$	18
Variable manufacturing overhead	$	10
Variable selling and administrative expense	$	19
Fixed costs:
Fixed manufacturing overhead	$	107,100
Fixed selling and administrative expense	$	24,840

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

Multiple Choice

• $85,560

• $116,160

• $126,960

• $8,280

Answer 1

Sol:

		Income Statement (Absorption Costing)
	Sales		$          386,400
	Production Cost:
		Direct Material	$          148,050
		Direct labor	$             56,700
		Variable manufacturing overhead	$             31,500
		Fixed manufacturing overhead	$          107,100
	Cost of Production		$          343,350
Add:	Opening Stock of Finished Goods		$                      -
Less:	Closing Stock of Finished Goods		$             42,510
	Cost of Goods Sold		$          300,840
Add:		Variable selling and administrative expense	$             52,440
Add:		Fixed selling and administrative expense	$             24,840
	Total Cost		$          378,120
	Profit (sales- total cost)		$               8,280

Hence total gross margin for the month under absorption costing is: $ 8,280