Gabuat Corporation, which has only one product, has provided the following data

Question

Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations Selling price $ 154 Units in beginning inventory Units produced Units sold Units in ending inventory 3,700 3,000 700 Variable costs per unit: $ 55 $ 24 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expense 6 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative expense $77,700 $18,000 The total gross margin for the month under the absorption costing approach is

Explanation / Answer

Unit product cost under absorption costing = 55+24+8+(77700/3700) = 108 per unit

Gross margin under absorption costing :

Sales revenue = 3000*154 = 462000

Cost of goods sold = 3000*108 = 324000

Gross margin = 462000-324000 = 138000

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