Winter Company Has No Beginning and Ending Inventories,and Reports the Following

question 27

Multiple Choice

Winter Company has no beginning and ending inventories,and reports the following data about its only product:
$\begin{array}{ll}\text { Direct materials used } & \$ 200,000 \\\text { Direct labor } & \$ 80,000 \\\text { Fixed indirect manufacturing } & \$ 100,000 \\\text { Fixed selling and administrative } & \$ 300,000\\\text { Variable indirect manufacturing } & \$ 20,000 \\\text { Variable selling and administrative } & \$ 60,000 \\\text { Selling price(per unit) } & \$ 150\end{array}$
$\begin{array} { l } \text {Units produced and sold }&10,000 \\\end{array}$

Winter Company uses the absorption approach to prepare the income statement.What is the gross margin?

• A) $740,000
• B) $1,040,000
• C) $1,100,000
• D) $1,160,000

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Definitions:

NPV

Net Present Value; a calculation used to determine the value of an investment by considering the present value of its expected future cash flows minus the initial investment cost.

Contribution Margin

The amount by which a product's sales price exceeds its total variable costs, indicating how much contribution the product makes towards fixed costs and profits.

Variable Cost

Costs that vary directly with the level of output or production activity, such as raw materials or hourly labor.

Cash Break-even

The point at which a company does not make a profit or loss from operations, calculated by covering all cash operating expenses with the revenue generated.