A business operated at 100% of capacity during its first month and incurred the following costs:Production costs (5,000 units): Direct materials$70,000 Direct labor20,000 Variable factory overhead10,000 Fixed factory overhead2,000$102,000Operating expenses: Variable operating expenses$17,000 Fixed operating expenses1,00018,000If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of manufacturing margin that would be reported on the absorption costing income statement isa.$70,000b.$50,000c.$54,000d.not reported

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 2CMA

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A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (5,000 units):
Direct materials	$70,000
Direct labor	20,000
Variable factory overhead	10,000
Fixed factory overhead	2,000	$102,000
Operating expenses:
Variable operating expenses	$17,000
Fixed operating expenses	1,000	18,000

If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of manufacturing margin that would be reported on the absorption costing income statement is

a.$70,000

b.$50,000

c.$54,000

d.not reported

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