Question

Galino Company, which has only one product, has provided the following data concerning its most recent month of operations: Use information for 8 and 9 Selling price $99 Units in beginning inventory Units produced Units sold..... Units in ending inventory 0 2,900 2,600 300 Variable costs per unit: Direct materials Direct labor........ Variable manufacturing overhead.......... Variable selling and administrative ....... Fixed costs: Fixed manufacturing overhead............... Fixed selling and administrative ......... $27 $11 S6 S7 $104,400 $13,000 The total gross margin for the month under the absorption costing approach is: A. $49,400 B. $18,200 C. $73,400 D. $124,800

Answer 1

Solution :
				Amount in $
	Calculation of Gross Margin for the month under Absorption Costing Approach
	Particulars		Calculation	Amount in $
	Sales	(Nos. Of units sold X Selling price per unit)	(2600 X 99)	2,57,400.00
	Total Cost of production
Less :	Direct Material	(Nos. Of units sold X Direct Material per unit)	(2600 X 27)	(70,200.00)
Less :	Direct Labour	(Nos. Of units sold X Direct Labour per unit)	(2600 X 11)	(28,600.00)
Less :	Variable Manufacturing Overhead	(Nos. Of units sold X Variable Overhead per unit)	(2600 X 6)	(15,600.00)
Less :	Fixed Manufacturing Overhead	(Nos. Of units sold X Fixed Manufacturing Overhead / Total units produced)	(2600 X 104400 / 2900)	(93,600.00)
	Gross Margin			49,400.00
	Option A is correct i.e. $ 49400.
Notes :	Absorption costing includes all costs, including fixed costs, related to production,