A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total gross margin for the month under absorption costing is:
A)$6,800
B)$197,200
C)$149,600
D)$179,000

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:  The total gross margin for the month under absorption costing is:
A)$6,800 
B)$197,200 
C)$149,600 
D)$179,000

Quizplus · Accepted Answer

To calculate the gross margin under absorption costing, we need to subtract the cost of goods sold (COGS) from the total sales revenue, and then subtract the total manufacturing overhead costs from the resulting gross margin.
Total sales revenue = 650,000
COGS under absorption costing:
Direct materials = 230,000
Direct labor = 130,000
Variable manufacturing overhead = 30,000
Fixed manufacturing overhead = 70,000
Total COGS = 460,000
Gross margin = 650,000 - 460,000 = 190,000
Total manufacturing overhead = 40,400 + 50,000 + 59,200 = 149,600
Gross margin under absorption costing = 190,000 - 149,600 = 40,400
Therefore, the correct answer is C.

A Manufacturing Company That Produces a Single Product Has Provided