Question

Diego Company manufactures one product that is sold for $73 per unit in two geographic regions--the East and West regions. The following information pertains to the company's first year of operations in which it produced 56,000 units and sold 51,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 784,000 $ 672,000 The company sold 38,000 units in the East region and 13,000 units in the West region. It determined that $300,000 of its fixed selling and administrative expense is traceable to the West region, $250,000 is traceable to the East region, and the remaining $122,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 5. What is the company's total gross margin under absorption costing? Total gross margin

Answer 1

Sof(5) Diego Company Statement showing Gross Margin Uuder Absorbtion Casting Particular Amount Revenue (51,0000 $73) $ 3,723,000 les & Cost of Good Sold Direct Materials (Slooox $24) $(1224,000) Direct Labour (51,0000 $ 16) | $ (816,000) Variable Manufacturing Overhead | $ (102,000) fixed Manufacturing declared $ (714,000) Gross Morgan $ 867,000 Sol (6) - Diego Company In come statement under Absorlotion Costing Particulari's Amount Revenure $ 3,723,000 less Cost of Goods Sould Direct Materials $(1224,0002 Direct Labour $ (816,000) Variable Manufacturing Overbread $ (102,000) fixed Manufacturing Overhead I $ 714,000 Gross Margin $ 867,000 -lesso Expenses- Variable selling and Administrative Ex beusel $ (153,000 fixed selling and Administrative Exprense $(672,000) Operating Income (loss) | $ 42,000

Costing 1 Amount $3723,000 Diego Compound Income Statement Under Variab. Particulars Revenue less: Variable Costs - Direct Materials Direct labour Variable Manufacturing Overhead Variable Selling and Admin's treikive fx premise Contribution margin: less & fixed Costs - fixed Manufacturing Overhead fixed Selling and Administrative Expeuse $(1,224,000) $ (816,000) $ (102,000) $ (153.000) $ 1428.000 $(784,000) $ (672,000) Obrating Income (loss) $(28,000) Sol.lt _ Difference of variable Costing and Absorption Costing aler operating In Come Closses) Variable Corting Net operating Income Closs ex) $(28000) Absorpties Celting Net operating Income Classes) $42000 Difference $14,000

Sol (8) Break evenfoin (in Units) as - fixed Costs Contribution Margin perunit $1456,000 $28 52.000 Uniles