Question

Ramort Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $60 per unit 1 Direct materials Direct labor Overhead costs for the year Variable overhead Fixed overhead per year Selling and administrative costs for the year Variable Fixed Normal production level (in units) points $ 10 per unit 12 per unit Skipped $ $40,000 3 per unit $ $65,200 20,e00 units 2 per unit oBcok Print Compute gross margin under absorption costing. References Production volume Cost of goods sold: 20,000 units Cost of goods sold per unit Number of units sold Total cost of goods sold

Answer 1

ANSWER

Manufacturing cost per unit = Direct material + Direct labor + Variable overhead + Fixed overhead.

= 10 + 12 + 3 + 40000 / 20000

= 10 + 12 + 3 + 2

= $ 27

Gross margin (in absorption costing system) = Sales - Cost of goods sold

= (20000 * 60) - (20000 * 27)

= 1200000 - 540000

= $ 660000.

Net operating income (in absorption costing system) = Gross margin - Selling & Administrative costs.

= 660000 - [ (2 * 20000) + 65200 ]

= 660000 - [ 40000 + 65200 ]

= 660000 - 105200

= $ 554800

Conclusion :-

Gross margin (in absorption costing system)	$ 660000
Net operating income (in absorption costing system)	$ 554800

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