Robertson Company, which began business at the start of 2012, had the following data: Planned and actual production: 40,000 units
Sales: 37,000 units at $15 per unit
Production costs: Variable, $4 per unit; Fixed, $260,000
Selling and administrative costs: Variable $1 per unit; Fixed $32,000
The gross margin that Robertson would disclose on its 2012 absorption-costing income statement is:
A)$97,500.
B)$147,000.
C)$166,500.
D)$370,000.
E)$403,500.

Question

Quizplus · Accepted Answer

Calculation of Cost of Goods Sold:
Variable Production Costs = 40,000 x $4 = $160,000
Fixed Production Costs = $260,000
Total Production Costs = $420,000
Cost of Goods Sold = Total Production Costs / Number of Units Produced
= $420,000 / 40,000 units
= $10.50 per unit
Cost of Goods Sold for 37,000 units = $10.50 x 37,000 = $388,500

Calculation of Gross Margin:
Sales = 37,000 x $15 = $555,000
Cost of Goods Sold = $388,500
Gross Margin = Sales - Cost of Goods Sold
= $555,000 - $388,500
= $166,500

Therefore, the gross margin that Robertson would disclose on its 2012 absorption-costing income statement is $166,500 (Choice C).

Robertson Company, Which Began Business at the Start of 2012