Question

The following information pertains to Alleigh’s Mannequins:

                 Manufacturing costs                    P1,500,000

                 Units manufactured                     30,000

                 Units sold                                     29,500 units sold for P85 per unit

                 Beginning inventory                    0 units

What is the amount of gross margin?

Answer 1

Gross Margin = Revenue - cost of goods sold

Manufacturing cost per unit = Total manufacturing costs / number of units manufactured

=1,500,000/30,000

=P50

Units in ending inventory = Units manufactured - units sold

=30,000 - 29,500

=500 units

Cost of ending inventory = Units in ending inventory x manufacturing cost per unit

=500x50

=P25,000

Cost of goods sold = Total manufacturing costs - Cost of ending inventory

=P(1,500,000 - 25,000)

=P1,475,000

Total revenue = number of units sold x selling price

=29,500 x 85

=P2,507,500

Gross Margin amount = P(2,507,500 - 1,475,000)

Gross Margin amount = P1,032,500.