Heather, Incorporated reports the following annual cost data for its single product:
$\begin{array}{ll}
\text { Normal production and sales level } & 60,000 \text { units } \
\text { Direct materials } & \$ 9.00 \text { per unit } \
\text { Direct labor } & \$ 6.50 \text { per unit } \
\text { Variable overhead } & \$ 11.00 \text { per unit } \
\text { Fixed overhead } & \$ 720,000 \text { in total }
\end{array}$ This product is normally sold for $56 per unit.If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Question

Heather, Incorporated reports the following annual cost data for its single product:
 $\begin{array}{ll}
\text { Normal production and sales level } & 60,000 \text { units } \
\text { Direct materials } & \$ 9.00 \text { per unit } \
\text { Direct labor } & \$ 6.50 \text { per unit } \
\text { Variable overhead } & \$ 11.00 \text { per unit } \
\text { Fixed overhead } & \$ 720,000 \text { in total }
\end{array}$ This product is normally sold for $56 per unit.If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Quizplus · Accepted Answer

The Answer of Heather, Incorporated reports the following annual cost data for its single product:
 $\begin{array}{ll}
\text { Normal production and sales level } & 60,000 \text { units } \
\text { Direct materials } & \$ 9.00 \text { per unit } \
\text { Direct labor } & \$ 6.50 \text { per unit } \
\text { Variable overhead } & \$ 11.00 \text { per unit } \
\text { Fixed overhead } & \$ 720,000 \text { in total }
\end{array}$ This product is normally sold for $56 per unit.If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Heather, Incorporated Reports the Following Annual Cost Data for Its