The manager of the manufacturing division of Winnipeg Windows does not understand why gross margin went down in February when sales went up. Some of the information she has selected for evaluation include:
The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed manufacturing costs were $400,000. Selling and administrative expenses were all fixed.
Required:
Explain why the gross margin in February was lower than January even though February sales were higher. How would variable costing income statements help the manager understand the division's operating income?

Question

The manager of the manufacturing division of Winnipeg Windows does not understand why gross margin went down in February when sales went up. Some of the information she has selected for evaluation include:
  The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed manufacturing costs were $400,000. Selling and administrative expenses were all fixed.
Required:
Explain why the gross margin in February was lower than January even though February sales were higher. How would variable costing income statements help the manager understand the division's operating income?

Quizplus · Accepted Answer

The Answer of The manager of the manufacturing division of Winnipeg Windows does not understand why gross margin went down in February when sales went up. Some of the information she has selected for evaluation include:
  The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed manufacturing costs were $400,000. Selling and administrative expenses were all fixed.
Required:
Explain why the gross margin in February was lower than January even though February sales were higher. How would variable costing income statements help the manager understand the division's operating income?

The Manager of the Manufacturing Division of Winnipeg Windows Does