Asked by Latroy Mayfield on Jul 09, 2024
Verified
Dataport Company reports the following annual cost data for its single product:
This product is normally sold for $230 per unit.If Dataport increases its production to 100,000 units,while sales remain at the current 89,000 unit level,by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to increase current production.
Gross Margin
The difference between sales revenue and the cost of goods sold, indicating the basic profitability of the products or services sold.
Absorption Costing
An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the price of a product.
Idle Capacity
Unused or underutilized resources within a business, often indicating inefficiency, where machinery, space, or labor is not being employed to full capacity.
- Assess the consequences of cost attribution methods on income statements within assorted costing techniques.
Verified Answer
RT
Rahsheeda ThomasJul 13, 2024
Final Answer :
$3,738,000/89,000 units = $42 FOH per unit at 89,000 unit level
$3,738,000/100,000 units = $37.38 FOH per unit at 100,000 unit level
$42 - 37.38 = $4.62 less FOH cost in each unit sold
$4.62 × 89,000 = $411,180 gross margin increase
$3,738,000/100,000 units = $37.38 FOH per unit at 100,000 unit level
$42 - 37.38 = $4.62 less FOH cost in each unit sold
$4.62 × 89,000 = $411,180 gross margin increase
Learning Objectives
- Assess the consequences of cost attribution methods on income statements within assorted costing techniques.