Vero, Inc. began operations at the start of the current year, having a productio

Question

Vero, Inc. began operations at the start of the current year, having a production target of 69,000 units. Actual production totaled 69,000 units, and the company sold 95% of its manufacturing output at $55 per unit. The following costs were incurred: Manufacturing Direct materials used Direct labor Variable manufacturing overhead Fixed manufacturing overh $258,000 537,000 378,000 621,000 ead Selling and administrative: Variable Fixed 189,000 639,000 Required A. Assuming the use of variable costing, compute the cost of Vero's ending finished-goods inventory. B. Compute the company's contribution margin. Would Vero disclose the contribution margin on a variable-costing income statement or an absorption-costing income statement? C. Assuming the use of absorption costing, how much fixed selling and administrative cost would Vero include in the ending finished- goods inventory? D. Compute the company's gross margin. A. Ending finished-goods inventory B. Contribution margin C. Fixed selling and administrative cost D. Gross margin

Explanation / Answer

Units sold = 69000*5%= 65550 Variable unit product cost=(258000+537000+378000)/69000 = $17 A Ending finished goods inventory=17*(69000-65550)= $58650 B Contribution margin=65550*(55-17)-189000= $2301900 Variable costing income statement C Fixed selling and administrative expense $ 0 D Absorption unit product cost=17+(621000/69000)= $26 Gross margin=65550*(55-26)= $1900950

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