Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $ 143 Units in beginning inventory 0 Units produced 2,820 Units sold 2,770 Units in ending inventory 50 Variable costs per unit: Direct materials $ 47 Direct labor $ 23 Variable manufacturing overhead $ 14 Variable selling and administrative expense $ 11 Fixed costs: Fixed manufacturing overhead $ 95,880 Fixed selling and administrative expense $ 19,390 The total gross margin for the month under absorption costing is:

Answer 1

Answer: The total gross margin for the month under absorption costing is $69250.

Explanation:

For calculating gross margin for the month under absorption costing:

Variable selling and administrative = $\frac{Fixed\ manufacturing\ overhead}{Units\ produced }$

=  $\frac{ 95,880 }{2,820}$

= 34

Absorption costing unit product cost = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative

= 47 + 23 + 14 + 34

= 118

Total sales = Units sold × Selling price

= 2,770 × $143

= 396110

Cost of Goods Sold = Units sold × Absorption costing unit product cost

= 2,770 × $118

= 326860

Hence,

Total gross margin for the month under absorption costing = Total sales - Cost of Goods Sold

= 396110 - 326860

= $69250

∴The total gross margin for the month under absorption costing is $69250.