Chown Company, Which Has Only One Product, Has Provided the Following

question 50

Multiple Choice

Chown Company, which has only one product, has provided the following data concerning its most recent month of operations:
$\begin{array}{l|r|}\hline \text { Selling price } & \$ 110 \\\hline \text { Units in beginning inventory } & 0 \\\hline \text { Units produced } & 8,000 \\\hline \text { Units sold } & 7,800 \\\hline \text { Units in ending inventory } & 200 \\\hline \text { Variable costs per unit: } & \\\hline \text { Direct materials } & \$ 22 \\\hline \text { Direct labour } & \$ 31 \\\hline \text { Variable manufacturing overhead } & \$ 3 \\\hline \text { Variable selling and administrative } & \$ 4 \\\hline \text { Fixed costs: } & \\\hline \text { Fixed manufacturing overhead } & \$ 248,000 \\\hline \text { Fixed selling and administrative } & \$ 140,400 \\\hline\end{array}$

-What was the total gross margin for the month under the absorption costing approach?

• A) $7,800.
• B) $179,400.
• C) $196,800.
• D) $390,000.

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Definitions:

Consideration

A concept in contract law, referring to something of value exchanged between parties as part of an agreement.

Gratuitous Promise

A voluntary promise or agreement without consideration, where the promisor is not legally bound to fulfill the promise.

Common Law

A legal system based on judicial decisions and precedents rather than statutory laws, common in many English-speaking countries.

Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.