. If the company uses absorption costing, compute gross profit assuming (a) 12,800 units are produced and 12,800 units are sold and (b) 16,000 units are produced and 12,800 units are sold. 2. If the company uses variable costing, how much would contribution margin differ if the company produced 16,000 units instead of producing 12,800? Assume the company sells 12,800 units. Hint: Calculations are not required.
A manufacturer reports direct materials of $4 per unit, direct labor of $1 per unit, and variable overhead of $3 per unit. Fixed overhead is $128,000 per year, and the company estimates sales of 12,800 units at a sales price of $20 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) 12,800 units are produced and 12,800 units are sold and (b) 16,000 units are produced and 12,800 units are sold.
2. If the company uses variable costing, how much would contribution margin differ if the company produced 16,000 units instead of producing 12,800? Assume the company sells 12,800 units. Hint: Calculations are not required.
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