Question

The unit sales for the month was 8,000 and the total sales was $480,000. The direct labor wage rate is $10 per hour and each kg of raw material is $2. Each unit of finished goods requires 3 direct labor hours and 5 kg of raw materials. If we assume that there is no fixed overhead and the variable overhead is $2.5 per direct labor hour, what is the gross margin percentage?

Answer 1

Sales Revenue	$       480,000
Less:
Direct Material (8000*2*5kg)	$         80,000
Direct Labor (8000*$10*3 hours)	$       240,000
Variable Overhead (8000*$2.5*3 hours)	$         60,000
Gross Margin	$       100,000
Gross Margin % ($100000/480000)	20.83%