During its first year of operations,Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages.Lease payments and utilities on the production facilities amounted to $17,000 while general,selling,and administrative expenses totaled $8,000.The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What is the amount of gross margin for the first year?
A) $15,000
B) $24,000
C) $20,000
D) $45,000

Question

Quizplus · Accepted Answer

Gross margin is calculated as sales revenue minus cost of goods sold (COGS). Sales revenue is 3,000 units * $15.00 = $45,000. COGS includes direct materials, direct labor, and manufacturing overhead (lease payments and utilities for production facilities), totaling $14,000 + $19,000 + $17,000 = $50,000. However, since only 3,000 of the 5,000 units produced were sold, we need to adjust the COGS for the units sold. The COGS per unit is $50,000 / 5,000 units = $10 per unit. Thus, COGS for the units sold is 3,000 units * $10 = $30,000. Gross margin = $45,000 - $30,000 = $15,000.

During Its First Year of Operations,Silverman Company Paid $14,000 for Direct