Winter Company has no beginning and ending inventories, and reports the following data about its only product: Direct materials used $200,000 Direct labor $80,000 Fixed indirect manufacturing $100,000 Fixed selling and administrative $300,000 Variable indirect manufacturing $20,000 Variable selling and administrative $60,000 Selling price(per unit) $150 Units produced and sold 10,000 Winter Company uses the absorption approach to prepare the income statement. What is the gross margin

$1,100,000

Explanation:

Direct materials = $200,000

Direct labor = $80,000

Fixed indirect manufacturing overhead= $100,000

Fixed selling and administrative = $300,000

Variable indirect manufacturing = $20,000

Variable selling and administrative cost = $60,000

Selling price(per unit) = $150

Total Units produced and sold = 10,000

Total revenue from sales = selling price(per unit) × total units sold

Total sales revenue =$150×10000 = $1,500,000

Under Absorption costing, fixed cost and variable cost have all be incorporated into the cost of goods.

Therefore, cost of goods sold is given by ;

Direct labor cost +direct material cost + fixed indirect manufacturing overhead + variable indirect manufacturing cost

Therefore,

Gross margin = (sales revenue - cost of goods sold)

Cost of goods sold = $(200,000+80,000+100,000+20,000) = $400,000

Gross margin = $(1,500,000 - 400,000) = $1,100,000

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