The following data relate to Lebeaux Corporation for the year just ended: Which of the following statements is correct?
A)Lebeaux's variable-costing income statement would show a gross margin of $270,000.
B)Lebeaux's variable-costing income statement would show a contribution margin of $330,000.
C)Lebeaux's absorption-costing income statement would show a contribution margin of $330,000.
D)Lebeaux's absorption-costing income statement would show a gross margin of $330,000.
E)Lebeaux's absorption-costing income statement would show a gross margin of $145,000.

Question

The following data relate to Lebeaux Corporation for the year just ended:  Which of the following statements is correct?
A)Lebeaux's variable-costing income statement would show a gross margin of $270,000. 
B)Lebeaux's variable-costing income statement would show a contribution margin of $330,000. 
C)Lebeaux's absorption-costing income statement would show a contribution margin of $330,000. 
D)Lebeaux's absorption-costing income statement would show a gross margin of $330,000. 
E)Lebeaux's absorption-costing income statement would show a gross margin of $145,000.

Quizplus · Accepted Answer

Variable costing income statement:
Sales revenue = $600,000
Variable costs = $270,000
Contribution margin = $330,000

Absorption costing income statement:
Sales revenue = $600,000
Cost of goods sold = Opening inventory + Manufacturing costs - Closing inventory
Opening inventory = 0
Manufacturing costs = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $100,000 + $120,000 + ($20,000/unit x 6,000 units) + $60,000
= $400,000
Closing inventory = 0
Cost of goods sold = $400,000
Gross margin = Sales revenue - Cost of goods sold
= $600,000 - $400,000
= $200,000
Note: Absorption costing includes fixed manufacturing overhead in the cost of goods sold, hence the difference in gross margin compared to the variable costing income statement.

The Following Data Relate to Lebeaux Corporation for the Year