A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (10,000 units):

Direct materials $140,000

Direct labor 40,000

Variable factory overhead 20,000

Fixed factory overhead 4,000 $204,000

Operating expenses:

Variable operating expenses $ 34,000

Fixed operating expenses 2,000 36,000

Required:

If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the amount of the manufacturing margin that would be reported on the variable costing income statement? a. not reportedb. $104,000c. $106,000d. $140,000

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Business

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21 May, 03:26

A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (10,000 units):

Direct materials $140,000

Direct labor 40,000

Variable factory overhead 20,000

Fixed factory overhead 4,000 $204,000

Operating expenses:

Variable operating expenses $ 34,000

Fixed operating expenses 2,000 36,000

Required:

If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the amount of the manufacturing margin that would be reported on the variable costing income statement? a. not reportedb. $104,000c. $106,000d. $140,000

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Answers (1)

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Ivy · Answer 1

Gross manufacturing margin = 140,000

Explanation:

Giving the following information:

Production costs (10,000 units):

Direct materials $140,000

Direct labor 40,000

Variable factory overhead 20,000

Total variable costs = 200,000

Units sold = 8,000 units

The manufacturing margin is the result of deducting from the sales the variable components.

Unitary variable costs = 200,000/10,000 = $20

Sales = 300,000

Variable costs = (20*8,000) = 160,000

Gross manufacturing margin = 140,000