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3 October, 21:09

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos?

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  1. 4 October, 00:26
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    The gross profit margin for the cat condo is 50%

    Explanation:

    Since the gross profit per unit is not given, so first we have to find it. The calculation is shown below:

    = Selling price per unit - Direct materials cost per unit - direct labor costs per unit - Manufacturing overhead per unit

    = $90 per unit - $15 per unit - $10 per unit - $20 per unit ($10 per unit * 200%)

    = $45 per unit

    Now apply the Gross profit formula which is shown below:

    = (Gross profit per unit : selling price per unit) * 100

    = ($45 per unit : $90 per unit) * 100

    = 50%
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