Question
Loring Company has incurred the following operating costs for the month: Variable costs per unit: Direct materials . $5.00 Direct labor .. $3.00 Variable overhead
Loring Company has incurred the following operating costs for the month:
Variable costs per unit:
Direct materials . $5.00
Direct labor .. $3.00
Variable overhead . $2.00
Variable selling.. $1.00
Fixed costs per month:
Fixed overhead . $4,000
Fixed selling & administrative.. $3,600
Fixed overhead is applied (assigned) to each unit of product based on the budgeted production of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory. A total of 2,100 units were sold during the month at a price of $20.
1. What is the gross margin that needs to be reported under absorption costing?
A) $14,700
B) $21,000
C) $18,000
D) $16,800
2. What is the contribution margin that needs to be reported under variable costing?
A) $14,700
B) $21,000
C) $20,000
D) $18,900
3. What is operating income that needs to be reported under absorption costing?
A) $11,100
B) $13,200
C) $12,300
D) $12,400
4. What is operating income that needs to be reported under variable costing?
A) $12,400
B) $11,300
C) $13,400
D) $9,200
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