3.00 points Quick Study 19-8 Production level, variable costing, gross margin LO

Question

3.00 points Quick Study 19-8 Production level, variable costing, gross margin LO P2 Ramort Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $60 per unit. If Ramort doubles its production to 40,000 units while sales remain at the current 20,000-unit level, by how much would the company's contribution margin increase or decrease under variable costing? Direct materials Direct labor Overhead costs for the year $ 10 per unit $12 per unit 3 per unit Variable overhead Fixed overhead per year Selling and adminstrative costs for the year Variable Fixed $2 per unit $ 65,200 Normal production level (in units) 20,000 units Would the income be different if using variable costing instead of absorption costing? RAMORT COMPANY Variable Costing Income Statement (Partial) Production volume (units) Sales volume (units) 40,000 20,000 20,000 ost of goods sold Direct labor Direct materials Selling and administrative s margin variable costing, can a company increase Yes its net income by increasing production?

Explanation / Answer

DIAZ COMPANY Absorption costing income statement Sales $ 3,000,000 Less: Cost of goods sold Fixed overhead cost ($320,000/80,000*50,000) $     200,000 Variable manufacturing cost $ 1,400,000 Total cost of goods sold $ 1,600,000 Gross margin $ 1,400,000 Selling and general administration expenses Variable Selling and general administration expenses $     250,000 Fixed Selling and general administration expenses $     160,000 Total fixed expenses $     410,000 Net income (loss) $     990,000

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.