An appliance repair shop purchased materials costing $9,000 in May. The beginning inventory of material parts was $4,500 and the ending inventory of material parts was $4,000. Payments for direct labour for May totalled $27,000, secretarial costs were $2,000, and overhead of $5,000 was incurred. In addition, $5,000 was spent on advertising and $2,000 for the franchise name. Revenue for May was $50,000.
-Refer to the figure.What is the gross margin for May?

Question

Quizplus · Accepted Answer

The gross margin can be calculated by subtracting the cost of goods sold from the sales revenue. In May, the sales revenue is $50,000 and the cost of goods sold is $41,500. Therefore, the gross margin is $8,500 (option B).

An Appliance Repair Shop Purchased Materials Costing $9,000 in May