Use the following information to determine the gross margin for Pacific States M

Question

Use the following information to determine the gross margin for Pacific States Manufacturing for the year just ended (all amounts are in thousands ($000) of dollars:

Sales $31,800
Purchases of direct materials 7,000
Direct labor 5,000
Work in process inventory, 1/1 800
Work in process inventory, 12/31 3,000
Finished goods inventory, 1/1 4,000
Finished goods inventory, 12/31 5,300
Accounts payable, 1/1 1,700
Accounts payable, 12/31 1,500
Direct materials inventory, 1/1 6,000
Direct materials inventory, 12/31 1,000
Indirect labor 600
Indirect materials used 500
Utilities expense, factory 1,900
Depreciation on factory equipment 3,500

Gross Margin _________________


2. Which costs will change with a decrease in activity within the relevant range?
A) Total fixed costs and total variable cost.
B) Unit fixed costs and total variable cost.
C) Unit variable cost and unit fixed cost.
D) Unit fixed cost and total fixed cost.

Explanation / Answer

B) Unit fixed costs and total variable cost.

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