The Gross Margin That the Company Would Disclose on an Absorption-Costing

question 36

Multiple Choice

The gross margin that the company would disclose on an absorption-costing income statement is:

• A)$0.
• B)$133,000.
• C)$166,500.
• D)$342,000.
• E)some other amount.
• Original answer is wrong ($120,000).Should be $133,000.

---

Definitions:

Annual Depreciation Expense

The portion of the cost of a fixed asset that is charged as an expense in a particular fiscal year, as a result of wear, tear, and obsolescence.

Straight-Line Depreciation

A method of calculating the depreciation of an asset by evenly spreading its cost over the expected life of the asset.

Asset Impairment Loss

A sudden write-down or devaluation of an asset to its fair market value which is lower than its currently recorded cost, reflecting unexpected decreases in value.

Future Cash Flows

Estimated incoming and outgoing cash transactions expected to occur in the future.