During its first year of operation Mazer Manufacturing Company produced 4,500 units of inventory and sold 2,050 units. Mazer incurred variable product cost of $3.5 per unit and $5,850 of fixed manufacturing overhead costs. The sales price of the products was $8.5 per unit. Determine the amount of gross margin Mazer would report if the company uses absorption costing. (Do not round intermediate calculations.)

Gross profit = $7,585

Explanation:

Giving the following information:

Units produced = 4,500 units

Units sold = 2,050 units.

Unitary variable cost = $3.5 per unit

Fixed manufacturing overhead = $5,850

The sales price of the products was $8.5 per unit.

Under the absorption costing method, the fixed manufacturing overhead is part of the product cost. Therefore, the units remaining in inventory have fixed costs incorporated.

Unitary cost = 3.5 + 5,850/4,500 = $4.8

Sales = 2,050*8.5 = 17,425

Cost of goods sold = 2,050*4.8 = (9,840)

Gross profit = $7,585