Swola Company Reports the Following Annual Cost Data for Its

question 57

Multiple Choice

Swola Company reports the following annual cost data for its single product. $\begin{array}{ll}\text { Normal production level } & 75,000 \text { units } \\\text { Direct materials } & \$ 1.25 \text { per unit } \\\text { Direct labor } & \$ 2.50 \text { per unit } \\\text { Variable overhead } & \$ 3.75 \text { per unit } \\\text { Fixed overhead } & \$ 300,000 \text { in total }\end{array}$ This product is normally sold for $25 per unit.If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's gross margin increase or decrease under variable costing?

• A)$187,500 increase.
• B)$112,500 increase.
• C)There will be no change in gross margin.
• D)$112,500 decrease.
• E)$187,500 decrease.

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Definitions:

Glucose

A simple sugar that is an important source of energy and is involved in many metabolic processes.

Nitrogenous Waste

Waste products that contain nitrogen, typically produced by the metabolic processing of proteins and nucleic acids, and excreted in the form of urea, ammonia, uric acid, or creatinine.

Ion Balance

The maintenance of proper concentration of ions inside and outside the cell, crucial for various physiological processes including nerve impulse transmission and muscle contraction.

Urinary

Relating to the organs and processes involved in the production, storage, and excretion of urine.