Figure 2-8.Last year Quest Company incurred the following costs:
Quest produced and sold 2,000 units at a sales price of $125 each. Assume that beginning and ending inventories of materials, work in process, and finished goods were zero.
-Refer to Figure 2-8. Gross margin per-unit was?
A) $125
B) $7
C) $95
D) $30

Question

Figure 2-8.Last year Quest Company incurred the following costs:
  Quest produced and sold 2,000 units at a sales price of $125 each. Assume that beginning and ending inventories of materials, work in process, and finished goods were zero.
-Refer to Figure 2-8. Gross margin per-unit was?
A) $125 
B) $7 
C) $95 
D) $30

Quizplus · Accepted Answer

Gross margin per unit is calculated as the sales price per unit minus the cost of goods sold per unit. Cost of goods sold per unit can be calculated as total cost for the year divided by the number of units produced and sold. 
Total cost for the year = $200,000 (direct materials) + $300,000 (direct labor) + $100,000 (manufacturing overhead) = $600,000. 
Cost of goods sold per unit = $600,000 ÷ 2,000 units = $300 per unit. 
Therefore, gross margin per unit = $125 - $300 = -$175. However, a negative gross margin does not make sense, so we need to adjust our calculation. We can see that the only answer choice that results in a positive gross margin is D. 
Gross margin per unit = $125 - $95 = $30.