Vegas Company has the following unit costs:
$\begin{array}{llr}
\text { Variable manufacturing overhead } &\$25\
\text { Direct materials } &20\
\text { Direct labor} &19\
\text { Fixed manufacturing overhead} &12\
\text { Fixed marketing and administrative }&7
\end{array}$

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Vegas produced and sold 10,000 units. If the product sells for $100, what is the gross margin?
A) $170,000
B) $240,000
C) $290,000
D) $360,000

Question

Vegas Company has the following unit costs:
$\begin{array}{llr}
  \text { Variable manufacturing overhead } &\$25\
 \text { Direct materials } &20\
 \text {  Direct labor} &19\
 \text {  Fixed manufacturing overhead} &12\
\text { Fixed marketing and administrative }&7
\end{array}$

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Vegas produced and sold 10,000 units. If the product sells for $100, what is the gross margin?
A) $170,000
B) $240,000
C) $290,000
D) $360,000

Quizplus · Accepted Answer

Gross margin is calculated as sales revenue minus cost of goods sold (COGS). COGS includes variable manufacturing overhead, direct materials, direct labor, and fixed manufacturing overhead. Total COGS per unit is $76 ($25 + $20 + $19 + $12). Total sales revenue is $1,000,000 (10,000 units x $100). Total COGS is $760,000 (10,000 units x $76). Gross margin is $240,000 ($1,000,000 - $760,000).

Vegas Company Has the Following Unit Costs - Vegas Produced and Sold 10,000 Units

Vegas Company Has the Following Unit Costs -
Vegas Produced and Sold 10,000 Units