Question

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos?

Answer 1

Answer:

The gross profit margin for the cat condo is 50%

Explanation:

Since the gross profit per unit is not given, so first we have to find it. The calculation is shown below:

= Selling price per unit - Direct materials cost per unit - direct labor costs per unit - Manufacturing overhead per unit

= $90 per unit - $15 per unit - $10 per unit - $20 per unit ( $10 per unit × 200%)

= $45 per unit

Now apply the Gross profit formula which is shown below:

= (Gross profit per unit ÷ selling price per unit) × 100

= ($45 per unit ÷ $90 per unit) × 100

= 50%

Answer 2

The gross profit margin of Lincoln, Inc., for the cat condo is 50%.

What is gross profit margin?

Gross profit margin is a magnitude relation that shows a company’s sales action, specifically, the proportion of revenues gotten after deducting the cost of goods sold (COGS).

Computation of gross profit margin:

First, we have to calculate the gross profit unit:

$\text{Gross Profit Unit}= \text{Selling Price Per Unit} - \text{Direct Materials Cost Per Unit} - \text{Direct Labor Costs Per Unit - Manufacturing Overhead Per Unit}\\\\\\\text{Gross Profit Unit}= \ 90 \text{Per Unit} - \ 15 \text{Per Unit} - \ 10 \text{Per Unit} - \ 20\text{ Per Unit} ( 10 per unit \times200\%)\\\\\text{Gross Profit Unit}= 45 Per Unit$

Now, The gross profit margin are as follows:

$\text{Gross Profit Margin}= \dfrac{\text{Gross Profit Per Unit}}{\text{Selling Price Per Unit}}\times100\\\\\\\text{Gross Profit Margin}=\dfrac{\ 45}{\ 90}\times100\\\\\\\text{Gross Profit Margin}= 50\%$

Therefore, the gross profit margin is 50%.

To learn more about the gross profit margin, refer to:

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