Swisher, Incorporated Reports the Following Annual Cost Data for Its

question 82

Multiple Choice

Swisher, Incorporated reports the following annual cost data for its single product: $\begin{array}{ll}\text { Normal production level } & 30,000 \text { units } \\\text { Direct materials } & \$ 6.40 \text { per unit } \\\text { Direct labor } & \$ 3.93 \text { per unit } \\\text { Variable overhead } & \$ 5.80 \text { per unit } \\\text { Fixed overhead } & \$ 150,000 \text { in total }\end{array}$ This product is normally sold for $48 per unit.If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's gross margin increase or decrease under variable costing?

• A)$60,000 decrease.
• B)$90,000 decrease.
• C)There is no change in gross margin.
• D)$90,000 increase.
• E)$60,000 increase.

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Definitions:

Factor Analytic

A method used in statistics and psychology to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved variables called factors.

Rational

Based on logic or reason; capable of coherent thought processes and sound judgment.

Empirical

Based on observation or experiment rather than theory or logic, used in contexts where knowledge is derived from empirical evidence.

Significance Testing

A statistical method used to determine if the results of a study are likely to be true or if they might have occurred by chance.