Rourke Inc. reports the following annual cost data for its single product.
Normal production and sales level | 60,000 units |
Sales price | $56.00 per unit |
Direct materials | $9.00 per unit |
Direct labor | $6.50 per unit |
Variable overhead | $11.00 per unit |
Fixed overhead | $720,000 in total |
If Rourke increases its production to 80,000 units, while sales remain at the current 60,000 unit level, by how much would the company’s gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.
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