Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory,$42,000; Work in Process Inventory,$90,000; and Finished Goods Inventory,$20,000.
During the year,the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials.Direct labor costs for the year were $120,000,and a total of $36,000 of manufacturing overhead costs were allocated to work in process.There was no over- or underapplied overhead.Ending work in process was $82,000 and ending finished goods was $35,000.Goods were sold to customers during the year for $360,000.How much gross margin would be reported for the year?
A) $110,000
B) $145,000
C) $125,000
D) $171,000

Question

Quizplus · Accepted Answer

Gross margin is calculated as Sales Revenue minus Cost of Goods Sold (COGS). To find COGS, calculate the cost of goods manufactured and adjust for changes in finished goods inventory. The cost of goods manufactured is the sum of beginning work in process, direct materials used, direct labor, and manufacturing overhead, minus ending work in process. Direct materials used is beginning raw materials plus purchases minus ending raw materials. After calculating COGS, subtract it from sales revenue to find the gross margin.

Tisdale Company Started the Year with the Following Beginning Account