Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $ 154 Units in beginning inventory 0 Units produced 2,560 Units sold 2,230 Units in ending inventory 330 Variable costs per unit: Direct materials $ 51 Direct labor $ 24 Variable manufacturing overhead $ 15 Variable selling and administrative expense $ 16 Fixed costs: Fixed manufacturing overhead $ 92,160 Fixed selling and administrative expense $ 11,150 The total gross margin for the month under absorption costing is:

Multiple Choice $107,040 $96,240 $15,610 $62,440

Answer 1

D) $ 62,440

Explanation :

Calculation for gross profit under absorption costing

	$	$
Sales revenue [ 2,230 X $ 154 ]		343,420
Cost of goods sold
Direct materials [ 2,230 X $ 51 ]	113,730
Direct labor [ 2,230 X $ 24 ]	53,520
Variable manufacturing overhead [ 2,230 X $ 15 ]	33,450
Fixed manufacturing absorbed [ 92,160 / 2,560 ] X 2,230	80,280
Cost of goods sold		280,980
Gross profit [Sales revenue - COGS ]		62,440

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