Question

Help Save & E Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 136 Units in beginning inventory Units produced Units sold Units in ending inventory 3,400 2,920 480 Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expense Fixed costs: Fixed manufacturing overhead Fixed selling and administrative expense wwww $68,000 $14,600 The total gross margin for the month under the absorption costing approach is: Multiple Choice O $108,040 0 $122.640 O S102 200

Answer 1

Answer to Question 1:

Cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
Cost per unit = $46 + $24 + $4 + $68,000/3,400
Cost per unit = $94

Sales = Selling price per unit * Units sold
Sales = $136 * 2,920
Sales = $397,120

Cost of goods sold = Cost per unit * Units sold
Cost of goods sold = $94 * 2,920
Cost of goods sold = $274,480

Gross margin = Sales - Cost of goods sold
Gross margin = $397,120 - $274,480
Gross margin = $122,640

Answer to Question 2:

Period cost = Variable selling and administrative expense per unit * Units sold + Fixed selling and administrative expense
Period cost = $9 * 920 + $17,480
Period cost = $25,760

Answer to Question 3:

Variable cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative expense
Variable cost per unit = $33 + $75 + $21 + $25
Variable cost per unit = $154

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $172 - $154
Contribution margin per unit = $18

Fixed expenses = Fixed manufacturing overhead + Fixed selling and administrative expense
Fixed expenses = $145,500 + $10,300
Fixed expenses = $155,800

Net operating income = Contribution margin per unit * Units sold - Fixed expenses
Net operating income = $18 * 9,300 - $155,800
Net operating income = $11,600