Using direct costing,the manufacturing margin is:
A) $550,000
B) $540,000
C) $480,000
D) $450,000

Question

Using direct costing,the manufacturing margin is:
A) $550,000 
B) $540,000 
C) $480,000 
D) $450,000

Quizplus · Accepted Answer

Direct costing only includes the variable manufacturing costs in the calculation of the manufacturing margin. Based on the given information, the variable manufacturing costs are $5 per unit, and 108,000 units were produced. Therefore, the total variable manufacturing costs are 5 x 108,000 = $540,000. This means that the manufacturing margin is equal to the sales revenue of $1,080,000 minus the variable manufacturing costs of $540,000, which is $540,000. Therefore, the best choice is B.

Using Direct Costing,the Manufacturing Margin Is