Question

Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 138 Units in beginning inventory 0 Units produced 2,600 Units sold 2,310 Units in ending inventory 290 Variable costs per unit: Direct materials $ 49 Direct labor $ 27 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 6 Fixed costs: Fixed manufacturing overhead $ 36,400 Fixed selling and administrative expense $ 13,860 The total gross margin for the month under the absorption costing approach is:

Answer 1

Absorption costing unit product cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead cost

Absorption costing unit product cost = $49 + $27 + $6 + ($36,400 / 2,600)

Absorption costing unit product cost = $96

Gross margin = Sales - Cost of goods sold

Gross margin = (2,310 units sold × $138 per unit) - (2,310 units sold × $96 per unit)

Gross margin = $97,020