A manufacturer reports direct materials of $5 per unit, direct labor of $2 per unit, and variable overhead of $3 per unit. Fixed overhead is $120,000 per year, and the company estimates sales of 12,000 units at a sales price of $25 per unit for the year. The company has no beginning finished goods inventory. 1. If the company uses absorption costing, compute gross profit assuming (a) 12,000 units are produced and 12,000 units are sold and (b) 15,000 units are produced and 12,000 units are sold. 2. If the company uses variable costing, how much would gross profit differ if the company produced 15,000 units instead of producing 12,000? Assume the company sells 12,000 units. Hint: Calculations are not required.

Answer rating: 100% (QA)

1 a Produced and sold 12000 units Sales 12000 x 25 300000 Less Cost of goods sold ... View the full answer