Jax Incorporated reports the following data for its only product. The company had no beginning finished goods inventory and it uses absorption costing. Sales price $ 57.50 per unit Direct materials $ 10.50 per unit Direct labor $ 8.00 per unit Variable overhead $ 12.50 per unit Fixed overhead $ 1,237,500 per year 1. Compute gross profit assuming (a) 75,000 units are produced and 75,000 units are sold and (b) 110,000 units are produced and 75,000 units are sold. 2. By how much would the company’s gross profit increase or decrease from producing 35,000 more units than it sells?
Jax Incorporated reports the following data for its only product. The company had no beginning finished goods inventory and it uses absorption costing. Sales price $ 57.50 per unit Direct materials $ 10.50 per unit Direct labor $ 8.00 per unit Variable overhead $ 12.50 per unit Fixed overhead $ 1,237,500 per year 1. Compute gross profit assuming (a) 75,000 units are produced and 75,000 units are sold and (b) 110,000 units are produced and 75,000 units are sold. 2. By how much would the company’s gross profit increase or decrease from producing 35,000 more units than it sells?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Jax Incorporated reports the following data for its only product. The company had no beginning finished goods inventory and it uses absorption costing.
| Sales price | $ 57.50 | per unit |
|---|---|---|
| Direct materials | $ 10.50 | per unit |
| Direct labor | $ 8.00 | per unit |
| Variable overhead | $ 12.50 | per unit |
| Fixed overhead | $ 1,237,500 | per year |
1. Compute gross profit assuming (a) 75,000 units are produced and 75,000 units are sold and (b) 110,000 units are produced and 75,000 units are sold.
2. By how much would the company’s gross profit increase or decrease from producing 35,000 more units than it sells?
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