Gonzalez Company has no beginning and ending inventories, and reports the follow

Question

Gonzalez Company has no beginning and ending inventories, and reports the following data about its only product:

Direct materials used                                             $300,000

Direct labor                                                                  $80,000

Fixed indirect manufacturing                              $100,000

Fixed selling and administrative                        $190,000

Variable indirect manufacturing                          $20,000

Variable selling and administrative                    $90,000

Selling price(per unit)                                                       $50

Units produced and sold                                           10,000

Gonzalez Company uses the absorption approach to prepare the income statement. What is the gross margin?

A) $0

B) $20,000

C) $100,000

D) $120,000

Explanation / Answer

Sales revenue 500000 Less: Cost of goods sold Direct materials used 300000 Direct labor   80000 Fixed indirect manufacturing 100000 Variable indirect manufacturing   20000 500000 Gross Margin 0 Option A is correct

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