Exercise $19-15($Static$)$ Absorption costing and overproduction LO C$1$

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.

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.

If the company uses variable costing, how much would contribution margin 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.

Complete this question by entering your answers in the tabs below.

Required $1$

Required $2$

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.