The total gross margin for the month under the absorption costing approach is:
A)$196,800
B)$179,400
C)$390,000
D)$7,800

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs in the cost of goods sold, including fixed manufacturing overhead costs. 
Total cost of goods sold for the month under absorption costing = $1,050,000 (direct materials) + $360,000 (direct labor) + $480,000 (variable manufacturing overhead) + $510,000 (fixed manufacturing overhead) = $2,400,000
Total revenue for the month = $2,579,400
Gross margin = revenue - cost of goods sold = $2,579,400 - $2,400,000 = $179,400

The Total Gross Margin for the Month Under the Absorption