Martol Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $80 per unit. If Martol doubles its production to 40,000 units while sales remain at the current 20,000 unit level, by how much would the company’s gross margin increase or decrease under absorption costing?
Direct materials . . . . . . . . . . . . . . . . . . . . . $10 per unit
Direct labor . . . . . . . . . . . . . . . . . . . . . . . $12 per unit
Overhead costs for the year
Variable overhead . . . . . . . . . . . . . . . . . . $3 per unit
Fixed overhead per year . . . . . . . . . . . . . $40,000
Normal production level (in units) . . . . . . . 20,000 units